It was created to make federal employment more attractive to persons who change jobs or who might not make a career of federal service. While contribution rules differ, TSP's tax advantages are the same for all. That is, the government defers income taxes on contributions, match funds and earnings until they're withdrawn, which is usually after workers retire. This is in addition to lowering current taxable income and income taxes. Each fund has a different pay-off and risk.
Participants can allocate their deposits and balances among any or all the funds.
The government guarantees G Fund investments and earnings. G Fund earnings rates tend to be lowest of the three, but virtually no risk is involved. The G Fund earned 5.66 percent in fiscal 1999. The government does not back the C or F funds, and investors can lose money if the stock and bond markets fall. C Fund profits are unlimited, but investments ride the volatile stock market.