TSP Contribution Rates: How Much to Save to Grab Every Dollar

Are you a federal or postal employee wondering what TSP contribution rates you should choose so you don’t leave money on the table? You’re in the right place. In this post, we explain how TSP works, why contribution rates matter, and how to make choices that grow your retirement savings without confusion.

The Thrift Savings Plan (TSP) is one of your biggest retirement tools. It works a lot like a 401(k) in the private sector, letting you choose how much of your paycheck goes into your retirement account. But unlike a private plan, your agency often adds extra money on top of what you contribute. If you understand the contribution rules, you can take full advantage of free matching funds and IRS limits to boost your nest egg over time.

What Are TSP Contribution Rates?

Contribution rates are the percentage of your basic pay that you elect to put into your TSP on each pay period. You choose this rate when you enroll, and you can change it whenever you want through your HR system (like PostalEASE or your agency’s employee portal).

These contributions go into your TSP account before income taxes (traditional) or after taxes (Roth), and they grow tax-deferred or tax-free depending on what you choose.

Why Your Contribution Rate Matters

Your contribution rate doesn’t just affect how much you save — it determines how much your agency will add to your account.

Here’s the deal for most federal and postal employees under FERS (Federal Employees Retirement System):

1% automatic contribution: Your agency puts in 1% of your basic pay whether you contribute or not.
Matching contributions up to 5%: If you put in your own money, your agency will match that up to 5%. They match dollar-for-dollar on the first 3%, then 50 cents on the dollar for the next 2%.

That means if you put 5% of your salary into your TSP, your agency will add another 5% total (1% automatic and 4% match), doubling your savings right away. If you contribute less than 5%, you miss free money.

How Much Should You Contribute — A Simple Rule

Here’s a rule that’s simple and usually smart:

Contribute at least 5% of your basic pay every pay period.

Why?

This gets you the full agency match — extra money your agency puts in.
You build savings faster without having to contribute a huge percentage of your income.
Your money grows over time because of compound earnings.

If you contribute less than 5%, you leave thousands of dollars in matching funds on the table over a 20–30 year career.

IRS Contribution Limits — What You Need to Know

Aside from the percentage you choose, there’s a yearly dollar limit set by the IRS. For 2025, the standard limit is $23,500. If you’re 50 or older, you can make extra “catch‑up” contributions (another $7,500).

Here’s how that looks:

Under age 50: Up to $23,500 in regular contributions.
Age 50+ catch‑up: Up to $31,000 total ($23,500 + $7,500).

These limits apply only to your contributions, not the agency match. Your agency’s 1% and match don’t count toward the IRS limit.

Don’t Stop at the Match — Think Bigger

It’s tempting to think “I’ll just put in 5% and call it a day,” but consider this:

The earlier and more consistently you contribute, the bigger your balance could be thanks to compounding.
If you can afford it, gradually increase your contribution over time. Some employees aim for 10% or more once they’re comfortable living on less take‑home pay.
For older employees close to retirement, catch‑up contributions can give a real boost.

Common Mistakes to Avoid

Here are a few pitfalls federal and postal employees run into:

1. Contributing too much early and losing the match

If you hit the IRS limit early in the year and stop contributing, you may miss matching dollars later in the year. Aim to spread contributions evenly over all pay periods.

2. Forgetting the match

Skipping the full 5% match is one of the biggest mistakes we see. That’s free money you permanently lose if you don’t take it.

3. Not reviewing your rate yearly

Pay raises and life changes might let you save more. Increase your contribution when you can.

How to Change Your TSP Contribution Rate

Changing your TSP contribution rate is straightforward:

Postal employees: Use PostalEASE through BLUE or LiteBlue.
Federal employees: Use your agency’s HR self‑service (like Employee Personal Page).
Enter a new percentage or dollar amount for TSP contributions.
Confirm your changes before the next pay period.

It only takes a few minutes, and you can update it any time.

Want Help Figuring Out Your Best Contribution Rate?

If you want personalized help and a clear plan for your TSP and other benefits, we can help.

👉 See how your TSP fits into your full retirement picture with The Benefit Coordinators.

Final Takeaway

TSP contribution rates matter more than you think. Pick a rate that:

Gets you the full agency match — at least 5%.
Fits your budget.
Helps you reach your long‑term retirement goals.

Start today, adjust as you go, and don’t let free match money slip through your fingers.

If you’re ready to get serious about your retirement savings strategy, book a consultation with our team at The Benefit Coordinators and let’s build a plan that works for you.

TSP Contribution Rates: How Much to Save to Grab Every Dollar