Image: Montri Nipitvittaya/Shutterstock.com
What did we do for retirement savings before the Thrift Savings Plan made its debut back in 1987? The TSP is what is called a “defined contribution plan” like a 401(k). 401(k)s were first introduced in 1978 and were quite popular by the time Uncle Sam joined the parade with the Thrift Savings Plan on April 1st of 1987.
Some federal employees didn’t need anything to supplement their retirement annuity. The Civil Service Retirement System (CSRS) was a generous retirement plan that would pay 80% of a retiring employee’s high-three salary if that employee retired after 41 years and 11 months of federal service. 80% of pre-retirement income is used by many financial professionals as a benchmark for income replacement. One who retires on 80% of their pre-retirement income, they say, will have a retirement lifestyle similar to their pre-retirement lifestyle.
Not all CSRS employees toughed it out for 41 years and 11 months but, if they retired at 30 years of service, they would receive 56.25% of their high three. A FERS retiree with 30 years of federal service would be entitled to either 30% or 33% of their high-three depending on their age at retirement. As it is today under FERS, special category employees received an enhanced benefit computation under the old CSRS system.
What else was available to supplement our retirement income prior to the advent of the TSP?
• Individual Retirement Arrangements (IRAs) were available for all who had earned income beginning in 1974. The contribution limit was $2,000 but keep in mind that the average federal salary in 1974 was somewhere around $10,000.
• Deferred annuities were also around (and had been around for some time). Those interested in this type of investment could contact an insurance agent. I was a letter carrier back in the pre-TSP days and my union (NALC) offered a deferred annuity for members. I contributed and built up retirement savings with a built-in insurance policy.
• Then there were United States Savings Bonds. Every May there was a bond drive and first line managers who aspired to higher positions (I was one back then), ended up coordinating the drives for their offices. With the advent of the Thrift Savings Plan, Savings Bond drives faded into obscurity.
These options are still available today for those who want to save more for retirement, but the Thrift Savings Plan should be your first choice. Max out in the TSP before you pursue other retirement savings vehicles. The TSP:
• Has relatively low expenses;
• Has a 5% employer match;
• Has returns that generally match the market; and
• Can be funded by payroll deductions.
If you’re wondering where to stash extra money for retirement, think first about your TSP.
John Grobe is a retired federal employee and retired retirement educator with over 30 years of experience in helping federal employees understand their retirement.
OPM Details Coverage Changes, Plan Dropouts for FEHB/PSHB in 2026
Does My FEHB/PSHB Plan Stack Up? Here’s How to Tell
2025 TSP Rollercoaster and the G Fund Merry-go-Round
5 Steps to Protect Your Federal Job During the Shutdown
Primer: Early out, buyout, reduction in force (RIF)
See also,
OPM Guidance Addresses Pay Issues arising During, After Shutdown