TSP Sees Investments Shift Younger, Financial Strain Evident in Withdrawals

The Federal Retirement Thrift Investment Board’s “2024 Annual Report” on the Thrift Savings Plan revealed high participation among federal employees, a slow but steady rise in deferral rates, and increasing use of both plan loans and hardship withdrawals, especially among mid-career and lower-paid workers. 

TSP participation among Federal Employee Retirement System participants remained at a record 95.9% for the second consecutive year, buoyed by automatic enrollment policies implemented in 2010 and enhanced in 2020, according to the report. Notably, participation among the youngest employees, those younger than age 30, reached 96.5%, while the highest-paid employees had the strongest participation rate at 98.2%. 

As of December 31, 2024, there were more than 4 million FERS participants with a balance in the TSP with more than 1 million holding a Roth balance. TSP had $845 billion in assets at the end of 2023. 

The average FERS deferral rate climbed to 9.2% in 2024, continuing a positive trend since the default contribution rate was raised to 5% in 2020. Employees in the highest salary quintile deferred an average of 10.7%, while those in the lowest quintile deferred 7.3%. 

The youngest employees also made gains, with those younger than 30 now deferring 7.6% of their income — well above the default threshold to receive the full employer match. 

The data also revealed a generational shift in investment preferences. Younger employees overwhelmingly allocated funds to Lifecycle Funds, with 65.8% of those younger than 30 using the diversified, target-date options—a stark contrast to just 14.8% among participants aged 70 and older. 

Additionally, allocations to the conservative Government Securities Investment Fund declined across all age groups, particularly among new entrants, who now hold just 1.5% of their assets there, down from 41.7% in 2014. 

TSP participants can invest their employee and employer contributions in the lifecycle funds or the following core funds: 

• Government Securities Investment Fund (G Fund)
• Fixed Income Index Investment Fund (F Fund)
• Common Stock Index Investment Fund (C Fund)
• Small Cap Stock Index Investment Fund (S Fund)
• International Stock Index Investment Fund (I Fund)

While plan participation and investment behavior trended positively, loan and hardship withdrawal data highlighted growing financial pressure among federal employees. 

Loan usage rose to 8.6% in 2024, with the 40 to 49 age cohort leading at 12%. Hardship withdrawals also increased to 3.9%, the highest level in five years. Mid-career employees again stood out, with hardship usage rates of 5.58% among those aged 40 to 49. Among salary cohorts, the second– lowest-paid group had the highest hardship withdrawal rate at 8.47%. 

These figures suggest increased financial strain among working participants, particularly among those balancing career and family obligations, according to the report.  

Roth TSP usage held steady at an average deferral rate of 7.1%, with the highest usage among the oldest and highest-paid employees. Traditional contributions remained more prevalent overall. 

The report released on June 30 examined participants over a five-year period, ending December 31, 2024.