neo@web:~/guides $ cat tsp-vs-401k
The TSP and the 401(k) share the same tax framework: pre-tax and Roth contributions, the same $24,500 elective deferral limit for 2026, employer matching, and the same early withdrawal penalty. The real differences are the investment menu (five funds plus Lifecycle funds versus hundreds of choices), fees (the TSP is far cheaper), the G Fund (which no 401(k) has), the match formula (1% automatic plus up to 4% match), and withdrawal mechanics. Money can be rolled in either direction without touching the annual limits.
Federal employees moving between government and private-sector jobs always ask the same question: how does the TSP stack up against the 401(k) on the other side? The short answer is that the tax skeleton is identical and nearly everything else differs. This guide walks through each difference so you can decide what to do with old accounts and where new contributions should go.
Both plans are defined-contribution plans under the same sections of the tax code. Your contributions can be traditional (pre-tax, taxed on withdrawal) or Roth (after-tax, qualified withdrawals tax-free). The 2026 elective deferral limit of $24,500 applies to both, as do the catch-up rules for participants 50 and older. Both allow loans from your own balance. Both hit you with the 10% early withdrawal penalty if you take money out before age 59 and one half, with similar exceptions. If you understand one plan's tax treatment, you understand the other's.
This is the starkest difference. The TSP offers five individual funds (G, F, C, S, I), eleven Lifecycle target-date funds built from those five, and a mutual fund window for participants who meet eligibility requirements and pay extra fees. That is the whole menu.
A typical private 401(k) offers dozens or hundreds of mutual funds: multiple large-cap options, target-date series from a fund company, sector funds, company stock, stable value funds, and more. Choice is a double-edged sword. Research consistently shows that most participants do worse with more options, picking past winners, chasing performance, and paying higher fees for the privilege. The TSP's constraint is a feature for most people: you cannot build a truly terrible portfolio from five index funds and a target-date series.
The mutual fund window narrows the gap for TSP participants who genuinely want more choice, but it comes with eligibility minimums and fees that the core funds do not have. Most participants never need it.
Fees are the least exciting and most important difference. The TSP publishes its expense ratios every year, and they are consistently among the lowest in the retirement industry, often under a tenth of a percent. A typical private 401(k) fund charges several times that, and small-company plans can charge far more once recordkeeping and advisory fees are layered in.
A half-percent annual fee gap sounds trivial until you compound it. On a $500,000 balance growing over twenty years, an extra 0.5% in annual fees costs roughly $80,000 in lost growth. This is the single strongest argument for rolling old 401(k) money into the TSP when you join federal service, and for leaving TSP money where it is when you leave.
No 401(k) has anything like the G Fund. It holds Treasury securities issued only for the TSP, pays interest tied to longer-term Treasury yields, and by law cannot lose principal. Private plans offer stable value or money market funds as their safe option, but those pay short-term rates and, in rare cases, can lose value. The G Fund's combination of long-term yields with zero principal risk exists nowhere else in American retirement savings.
In practice this means TSP participants have a genuinely free lunch for their conservative allocation: higher yield than cash with no downside. It is one more reason the TSP is worth keeping after separation.
The TSP match is fixed by law and identical for every participant: a 1% automatic contribution of basic pay even if you contribute nothing, plus a match of 100% on the first 3% you contribute and 50% on the next 2%. Contribute 5% and the agency puts in 5%.
Private 401(k) matches are set by each employer and vary widely. A common private-sector formula is 50% of the first 6% of pay, worth 3% total, and many employers require you to contribute something before they contribute anything. The TSP's automatic 1%, paid with zero employee contribution, is unusually generous. On the other hand, some private employers match more than 5% total or add profit-sharing contributions the TSP has no equivalent for.
Vesting differs too. TSP matching contributions vest immediately, and the automatic 1% vests after three years of service (two years for certain congressional and non-career positions). Private 401(k) vesting schedules are set by the employer and can stretch to six years.
Both plans let you borrow from your own balance and repay yourself with interest. TSP loan terms are set by federal regulation: general purpose loans run 12 to 60 months with a $50 fee, primary residence loans run 61 to 180 months with a $100 fee, and the interest rate is the G Fund rate at the time of the loan. Private 401(k) loan terms are set by each plan, usually up to five years, with the plan's own fees and interest rules.
Withdrawals after separation work similarly in concept, with the TSP historically being more restrictive. The 2019 modernization opened it up: unlimited partial lump-sum withdrawals, installment payments on several schedules, and the option to have the TSP purchase a life annuity. Private plans vary, but most now offer comparable flexibility. One TSP-specific wrinkle: married FERS participants need spousal consent or a waiver for certain withdrawal elections, a protection most private plans do not impose.
The tax code treats the TSP and 401(k)s as siblings, so money moves freely. Joining federal service with an old 401(k)? Roll it into the TSP and it joins your low-fee account without counting against the $24,500 annual limit. Leaving federal service for a private job? You can roll the TSP into the new 401(k) or an IRA, or leave it in the TSP where it keeps growing.
The decision usually comes down to fees and simplicity. Rolling into the TSP almost always lowers your costs. Rolling out of the TSP usually raises them, and should only be done for a concrete reason, like consolidating accounts or accessing investments the TSP does not offer. Whatever you do, use direct rollovers: the check goes plan to plan, no withholding, no 60-day scramble.
Compare your own trajectory with our TSP growth calculator, which separates your contributions, agency money, and growth. Our TSP funds guide covers the five-fund menu in detail.
Data current as of October 2026. Source: Thrift Savings Plan (tsp.gov).