TSP Rules for Military and Deployed Service Members

The Thrift Savings Plan is the federal government’s retirement savings program for service members, and in 2026 you can contribute up to $24,500 of your own pay, receive up to a 5% government match under the Blended Retirement System, and, when you’re drawing tax-exempt combat pay, push total annual additions as high as $72,000. The TSP rules for military and deployed service members cover every branch, including the Space Force and Coast Guard, and apply to Ready Reserve and National Guard members as well as active duty. What follows walks through the government contributions you’re entitled to, the 2026 limits, the special rules that unlock in a combat zone, and the traps that catch service members most often.

What the Government Contributes

Whether the government puts money into your account depends on which retirement system covers you. If you entered service on or after January 1, 2018, you were automatically enrolled in the Blended Retirement System. Members serving before that date had a window to opt in; if that window closed without action, you remain under the Legacy High-3 system and get no automatic or matching TSP contributions. Every dollar in a Legacy participant’s account came from their own paycheck.

Under the Blended Retirement System, the Department of Defense automatically contributes 1% of your basic pay after 60 days of service, whether or not you contribute anything yourself. At two years of service, matching kicks in: dollar for dollar on the first 3% of basic pay you contribute, and 50 cents on the dollar for the next 2%. Contribute at least 5% of your own basic pay and the government adds 5% on top.¹

Vesting

Your own contributions and their earnings belong to you immediately. Matching contributions and their earnings also vest immediately. The 1% automatic contribution is different: you must complete two years of service to become vested in it.² Separate before hitting the two-year mark and you forfeit those automatic contributions and any earnings on them.

2026 Contribution Limits

The IRS caps how much you can defer from your paycheck each year. For 2026, the elective deferral limit is $24,500, and it applies to your combined traditional and Roth contributions.³ The cap covers basic pay, incentive pay, and special pay earned outside a combat zone. Finance will generally stop deductions automatically once you reach it.

Catch-Up Contributions at 50 and Older

Turn 50 or older during 2026 and you can add $8,000 in catch-up contributions on top of the $24,500 standard limit, for a total of $32,500.⁴

Super Catch-Up at 60 Through 63

Starting in 2026, the SECURE 2.0 Act creates a higher catch-up limit for participants who turn 60, 61, 62, or 63 during the calendar year. Instead of $8,000, these participants can contribute up to $11,250 in catch-up contributions, bringing the total possible deferral to $35,750.⁴ The window closes after the year you turn 63. At 64, the regular catch-up limit returns.

Mandatory Roth Catch-Up for Higher Earners

Also effective January 1, 2026, if your wages in the prior year exceeded $150,000, any catch-up contributions must go into your Roth balance. The switch happens automatically. If you don’t already have a Roth TSP balance, the first Roth catch-up contribution creates one. Service members earning tax-exempt pay in a combat zone face a stricter version of this rule: catch-up contributions must be Roth regardless of income level.⁵ If you’d prefer to avoid Roth catch-up contributions entirely, lower your contribution rate so your total doesn’t exceed the $24,500 elective deferral limit.

Combat Zone Rules

Deployment to a designated combat zone changes the math dramatically. The $24,500 elective deferral limit still applies to your Roth contributions, but traditional contributions from tax-exempt combat pay fall under a separate, higher ceiling: the annual additions limit under IRC Section 415(c), which is $72,000 for 2026.⁴ That $72,000 includes your own contributions plus the government’s automatic 1% and any matching.⁵

The tax treatment is worth understanding clearly. Tax-exempt pay contributed to a traditional TSP account will not be taxed when you withdraw the principal, because it was never taxed going in. But the earnings those contributions generate will be taxed as ordinary income when you take distributions in retirement. The TSP tracks tax-exempt contributions separately so the correct amount is taxed decades later.

These rules apply for any month in which you spend at least one day in a qualifying combat zone. Current designated areas include the Arabian Peninsula (Iraq, Kuwait, Saudi Arabia, and surrounding waters), the Afghanistan area and associated support countries, the Kosovo area, and the Sinai Peninsula.⁶ Coordinate with your finance office so that contributions are coded correctly as tax-exempt on your Leave and Earnings Statement.

Roth or Traditional With Combat Pay

Contribute tax-exempt combat pay to your Roth TSP and you pay zero tax going in and zero tax coming out, including on the earnings. That is the rare double-tax-free treatment. The catch is that Roth contributions still count against the $24,500 elective deferral limit, so the total amount you can shelter that way is smaller. Traditional contributions from combat pay can fill the gap between $24,500 and $72,000, though the earnings will eventually be taxed. For most deployed service members, maxing the Roth first and then filling the rest with traditional tax-exempt contributions produces the best long-term outcome.

TSP Loans While Serving

Active duty service members can borrow from their TSP through two loan types: a general purpose loan and a residential loan for buying a primary home. General purpose loans need no documentation and carry a repayment window of one to five years. Residential loans require documentation of the purchase and can be repaid over up to 15 years.⁷ Both require a minimum of $1,000.

The maximum you can borrow is the smallest of three figures: your own contributions and their earnings (minus any outstanding balance); 50% of your vested balance or $10,000, whichever is greater, minus any outstanding balance; or $50,000 minus your highest outstanding loan balance over the past 12 months. The interest rate is fixed at the G Fund rate from the month before you apply and stays locked for the life of the loan.⁸

Loan Trap at Separation

Separating with an outstanding TSP loan is where service members get burned. You must either set up monthly payments by check or direct debit or pay the loan off in full. Do neither and the loan is foreclosed. The IRS treats the unpaid balance plus accrued interest as taxable income, and if you’re under 59½, you’ll owe the 10% early withdrawal penalty on top of the income tax.⁸ Once a separated participant’s loan is foreclosed, you cannot repay it.

Loan Suspension During Military Service

Federal civilian employees who leave their jobs to perform military service can have their TSP loan payments suspended during that period. Interest continues to accrue, and when the employee returns to civilian pay status, the loan is reamortized with the repayment term extended by the length of military service.⁹ Active duty uniformed services members with questions about loan repayment during deployment should contact their finance office; repayment procedures may differ from those for civilian employees.

Early Withdrawal Penalties

Pull money from your TSP before age 59½ after separating and the IRS adds a 10% additional tax on top of the income tax you already owe. Several exceptions carve out penalty-free access:

If you separate from service during or after the year you turn 55, the 10% penalty does not apply to TSP distributions.¹⁰
Qualified public safety employees, including federal law enforcement officers, firefighters, customs and border protection officers, corrections officers, and air traffic controllers, can take penalty-free distributions starting at age 50 after separation.¹⁰
Certain distributions to qualified reservists called to active duty for at least 180 days are exempt from the 10% penalty.¹⁰
You can avoid the penalty by taking substantially equal periodic payments over your life expectancy. Once started, the payments must continue without modification until the later of five years or age 59½. Changing the payment amount early triggers retroactive penalties plus interest on every previous distribution.¹¹

These exceptions only waive the 10% penalty. You still owe regular income tax on traditional TSP distributions regardless of which exception applies.

Spousal Rights

If you’re married, your spouse has rights to your TSP account that you cannot ignore. For uniformed services participants, the spouse is entitled to a joint and survivor annuity covering 50% of the account balance unless the spouse signs a waiver. Before you can take any in-service withdrawal or post-separation distribution, you must obtain your spouse’s written consent. The same requirement applies to changes in installment payment amounts. The TSP grants an exception to spousal consent only in narrow circumstances, such as when the spouse’s whereabouts are genuinely unknown or a court has issued an order addressing the situation.¹²

Beneficiaries and Death Benefits

Die without designating a beneficiary and the TSP distributes your account according to a fixed statutory order: first to your spouse, then equally to your children, then to your parents, then to the executor of your estate, and finally to next of kin under the laws of your state of residence. Wills, prenuptial agreements, separation agreements, and property settlement agreements cannot override this order. The only way to direct your TSP balance to someone other than the statutory default is to file a beneficiary designation form with the TSP. Stepchildren are not included in the definition of “child” unless you have legally adopted them, and stepparents are excluded from the “parents” category on the same logic.¹³

Update your beneficiary designation after marriage, divorce, or the birth of a child. Your TSP beneficiary form operates independently from any SGLI designations, and keeping the two aligned avoids a situation where the wrong person inherits your retirement savings.

Divorce and the TSP

The TSP does not follow the same rules as private-sector retirement plans. Standard Qualified Domestic Relations Orders that work for civilian 401(k) plans do not apply, because the TSP is not governed by ERISA. Instead, a court must issue what the TSP calls a “retirement benefits court order” that meets specific federal requirements.¹⁴

The order must explicitly name the “Thrift Savings Plan”; vague references to “federal benefits” or “thrift savings account” are rejected. It must state the exact dollar amount or percentage to be paid, specify which TSP account the order covers if the participant has more than one, include identifying information for both parties, and set an entitlement date that isn’t in the future. The TSP charges a $600 processing fee when it receives the court order, and it freezes the participant’s account until the matter is resolved, blocking loans and withdrawals.¹⁴ Getting the order drafted correctly the first time saves months.

After You Separate

When you leave the military, you cannot make new contributions, but your account remains open and continues to grow. You can still move money between the TSP’s investment funds, and the same low expense ratios (roughly 0.034% to 0.051% across the individual funds, and up to about 0.041% for Lifecycle funds) apply whether you’re active duty or separated.¹⁵

You can roll your TSP balance into an IRA or a new employer’s 401(k), or move money into your TSP from outside accounts. The TSP accepts rollovers of tax-deferred money from traditional IRAs, SIMPLE IRAs, and eligible employer plans like 401(k)s, 403(b)s, and 457(b)s. For Roth balances, the TSP accepts direct rollovers from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s, but not from a Roth IRA. Rollover contributions do not count against annual contribution limits.¹⁶ Given the TSP’s exceptionally low fees, consolidating outside retirement accounts into your TSP rather than rolling the TSP out is often the better financial move. Run the numbers on your other plan’s expense ratios before deciding.

1
Office of Financial Readiness. Understanding the Two Parts of the Blended Retirement System
2
Military Compensation. Vesting in the Thrift Savings Plan – Counselor Checklist
3
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
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Internal Revenue Service. Notice 2025-67 – 2026 Amounts Relating to Retirement Plans and IRAs
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Thrift Savings Plan. Contribution Limits
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Internal Revenue Service. Combat Zones Approved for Tax Benefits
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eCFR. 5 CFR Part 1655 – Loan Program
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Thrift Savings Plan. TSP Loans
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eCFR. 5 CFR 1620.45 – Suspending TSP Loans, Restoring Post-Employment Contributions
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Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
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eCFR. 5 CFR Part 1650 Subpart G – Spousal Rights
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14
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16
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