1. What is the Traditional TSP Formula?

The Traditional TSP (Thrift Savings Plan) formula calculates the future value of a pre-tax retirement investment based on compound interest. It helps federal employees and military personnel estimate their retirement savings growth.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

• \( P \) — Principal amount (initial investment)
• \( r \) — Annual interest rate (expressed as decimal)
• \( n \) — Number of years invested

Explanation: The formula calculates how much your initial investment will grow over time with compound interest, before taxes are considered.

3. Importance of Retirement Planning

Details: Accurate retirement planning is crucial for financial security in later years. The TSP is a key component of federal retirement benefits, offering tax advantages and investment options.

4. Using the Calculator

Tips: Enter principal amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and number of years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is Traditional TSP different from Roth TSP?
A: Traditional TSP contributions are pre-tax (reducing current taxable income), while Roth TSP contributions are after-tax but withdrawals are tax-free in retirement.

Q2: What's a realistic rate of return for TSP?
A: Historically, the C Fund (S&P 500 index) has averaged about 7% annually, but returns vary by fund and market conditions.

Q3: Does this account for TSP contributions?
A: This calculator shows growth of a single principal amount. For recurring contributions, use a future value of annuity calculator.

Q4: How does taxation affect the final amount?
A: Traditional TSP withdrawals are taxed as ordinary income. This calculator shows pre-tax value; actual after-tax value will be lower.

Q5: What are the current TSP contribution limits?
A: For 2023, the elective deferral limit is $22,500 ($30,000 if age 50+), with additional limits for special contributions.