The Thrift Savings Plan is not halal or haram as a whole; the ruling depends on which funds you hold. The G Fund (Treasury securities with guaranteed interest) and the F Fund (Bloomberg US Aggregate Bond Index) are interest-based, and all eleven Lifecycle (L) Funds hold both. The C, S and I Funds are unscreened stock indexes that contain banks, brewers and casinos, so they fail a strict screen but are tolerated by some scholars for employees with no alternative, provided impure income is purified. The mutual fund window, at $132 a year plus $28.75 per trade, is the only route to a screened fund inside the plan.
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What the TSP is, and why you cannot simply leave it
The TSP is the defined contribution retirement plan for federal civilian employees and members of the uniformed services, established by the Federal Employees' Retirement System Act of 1986 and run by the Federal Retirement Thrift Investment Board. It works like a 401(k): payroll deductions, traditional or Roth treatment, and agency money on top. FERS and BRS participants who contribute 5% of basic pay receive a total of 5% from their agency or service, made up of an Automatic (1%) Contribution and matching contributions, and new hires since October 2020 are automatically enrolled at 5% into the age-appropriate L Fund. A Muslim employee who opts out of the TSP to avoid interest gives up that 5%, which is pay they have earned. The sensible question is therefore not whether to use the TSP but how to allocate inside it, the same question our guide to whether a 401(k) employer match is halal answers for private-sector workers.
The five core funds, screened one by one
| Fund | What it holds (tsp.gov) | 2025 expense ratio | Shariah status |
|---|---|---|---|
| G Fund | US Treasury securities specially issued to the TSP; principal and interest guaranteed | 0.034% | Not halal: pure interest |
| F Fund | Index fund tracking the Bloomberg US Aggregate Bond Index (13,630 notes and bonds at Dec 31, 2025) | 0.035% | Not halal: conventional bonds |
| C Fund | All 500 stocks of the S&P 500 in index weights | 0.035% | Unscreened; tolerated by some scholars with purification |
| S Fund | Dow Jones US Completion Total Stock Market Index, small and mid caps outside the S&P 500 | 0.051% | Unscreened; tolerated by some scholars with purification |
| I Fund | MSCI ACWI IMI ex USA ex China ex Hong Kong Index | 0.048% | Unscreened; tolerated by some scholars with purification |
| L Funds (11) | Fixed mixes of all five core funds, rebalanced daily, shifting toward G and F over time | 0.035% (L Income) | Not halal: always contains G and F |
The G Fund is the one most federal employees treat as 'safe', and it is the clearest case. tsp.gov describes it as invested in Treasury securities specially issued to the TSP, with the rate set by the Treasury as the weighted average yield of about 202 Treasury securities, and payment of principal and interest guaranteed by the US government. That is a loan to the government at interest; there is no asset, lease or trade behind it. The F Fund is a sample of the US bond market, including corporate and government bonds, and tsp.gov lists credit default risk among its risks, which is only possible for an interest-bearing debt instrument. Our verdict page on conventional bonds sets out the consensus. Neither fund has a halal reading.
The stock funds are different in kind. The C Fund holds every S&P 500 company, which includes JPMorgan, Bank of America, Visa, Constellation Brands and Las Vegas Sands. A strict AAOIFI screen excludes those names, and roughly a quarter to a third of the index by weight fails either the business or the debt ratio test, depending on the screener used; the SPUS vs HLAL comparison shows how much of the S&P 500 a halal ETF drops. Some contemporary scholars, including those behind several US Muslim retirement guides, allow a broad index inside an employer plan when no screened fund is offered, on the basis that the impure portion is a small minority of revenue, the holding is involuntary in form, and the investor purifies. Others reject this and require the mutual fund window or an outside IRA. Both positions exist; you should know which one you are following and why.
Why the L Funds fail even though they are mostly stocks
The L Funds are the default for new hires, and for most Muslim employees they are where the money already sits. tsp.gov describes each of the eleven L Funds as a diversified mix of the five individual funds, rebalanced daily to a target allocation that is adjusted every quarter to become more conservative as the target date approaches; L 2030 rolls into L Income in 2030. Every L Fund, including L 2075, holds a slice of the G and F Funds, and the slice grows each year. There is no toggle to remove them. A Muslim employee who is comfortable with the C, S and I Funds can replicate the equity part of any L Fund manually and leave the bond part out; one who is not should use the mutual fund window. Either way, the first action for most readers is to move out of the L Fund they were defaulted into.
The mutual fund window: the only screened route inside the TSP
Since 2022 the TSP has offered a mutual fund window through a brokerage vendor. The rules on tsp.gov are precise. Your initial transfer must be at least $10,000 and no more than 25% of your total TSP balance, which means you need at least $40,000 in the plan to use it, and you can never hold more than 25% of your account in the window. Fees are a $37 annual administrative fee, a $95 annual maintenance fee ($132 combined, taken proportionally from your TSP funds; a $10,000 initial transfer becomes $9,868), and $28.75 per trade, plus the expense ratio of whatever fund you buy. Contributions cannot be directed into the window; you must transfer, and fund transfers are limited to two a month except into the G Fund. To withdraw you sell, sweep to the State Street Institutional US Government Money Market Fund (GVSXX), and transfer back.
The fund list is only visible once you log in, so we cannot confirm which halal mutual funds are on the menu, and you should check before paying the fees. The names to search for are the Amana funds from Saturna Capital (covered in our Amana Mutual Funds review), the Iman Fund from Allied Asset Advisors, and the Azzad funds from Azzad Asset Management. If none appear, the window does not solve the problem and an outside Roth IRA does. Note also the sweep fund: GVSXX is a government money market fund that earns interest while your cash waits, so keep uninvested cash in the window at zero and purify any dividend it pays.
A worked allocation for three types of federal employee
There is no single halal TSP allocation, because there is no single scholarly position. The three profiles below cover most readers; each assumes you contribute at least 5% to collect the full agency contribution, since forgoing earned pay is not a Shariah requirement.
- Strict screen, balance under $40,000: contribute 5% to the TSP in the C Fund only as a placeholder, purify, and direct every dollar above 5% to a halal Roth IRA outside the plan; move into the window as soon as the balance crosses $40,000.
- Strict screen, balance over $40,000: hold the maximum 25% of the account in a screened fund through the mutual fund window, the remaining 75% in C, S and I in the proportions of your chosen L Fund's equity sleeve, zero in G and F, and purify the 75%.
- Tolerant position: hold C, S and I only, in roughly 60/20/20 or the equity split of your target-date L Fund, zero in G and F, and purify annually using a screener's published impurity ratio for each index.
- Any position: never leave a default L Fund in place, because it adds G and F exposure every quarter without your action.
- Any position at retirement: when you want lower volatility, move the conservative sleeve to an outside sukuk or halal income fund via rollover rather than to the G Fund.
Purification, traditional vs Roth, and the 2026 catch-up rule
If you hold C, S or I, purification is not optional under the tolerant view; it is the condition that makes the view work. The method is to estimate the share of each index's dividends attributable to non-compliant revenue and give that share to charity each year. Screeners such as Zoya and Musaffa publish per-stock figures that can be aggregated for the S&P 500, and our article on zakat on investments including 401(k)s and ETFs covers the separate zakat calculation. Keep a record: the G Fund share in any L Fund you held before switching should be purified too, since that was interest.
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Traditional or Roth makes no Shariah difference; it is a tax choice, and tsp.gov's example (a $1,000 traditional contribution at a 20% withholding rate puts $200 back in your paycheck now, while a Roth distribution of $1,000 arrives tax-free later) is the right framing. One rule change matters for higher earners: from January 1, 2026, if you earned more than $150,000 in 2025 and make catch-up contributions, those contributions must be Roth, and the first Roth catch-up will create a Roth balance automatically. Agency contributions always land in the traditional balance regardless of your election. The retirement hub collects our guides on both.
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Our view: what a Muslim federal employee should do this week
Log in, and if you are in an L Fund, move out of it; that one change removes the interest exposure that is growing without your consent. Keep contributing at least 5% so you collect the agency's 5%. Then choose your position honestly. If you follow scholars who accept broad indexes under necessity, hold C, S and I, set a yearly purification reminder, and never touch G or F. If you follow the stricter view, use the mutual fund window once you have $40,000 (checking first that a screened fund is actually on the vendor's list), cap it at the 25% the rules allow, and put the rest of your retirement saving into a halal IRA with a provider like ShariaPortfolio or a self-directed brokerage account holding SPUS or HLAL.
Service members and employees nearing retirement have a cleaner option: once separated, the whole balance can be rolled to a halal IRA, and the G Fund question disappears. Until then, the TSP is a plan you can use with care, not one you must refuse. Facts checked against tsp.gov on September 18, 2026.
Frequently asked questions
Is the TSP G Fund halal?
No. tsp.gov describes the G Fund as invested in US Treasury securities specially issued to the TSP, with principal and interest guaranteed by the US government and a rate set from Treasury yields. That is a loan to the government at interest, which is riba. There is no scholarly position that treats a pure Treasury interest fund as permissible.
Is the TSP C Fund halal?
It is unscreened. The C Fund holds all 500 S&P 500 stocks, including banks, alcohol producers and casino operators, so it fails a strict AAOIFI screen. Some scholars permit broad index funds inside an employer plan when no screened option exists, provided the investor purifies the impure share of dividends; others require the mutual fund window or an outside IRA instead.
Are the TSP Lifecycle (L) Funds halal?
No. Each of the eleven L Funds is a fixed mix of all five core funds, including the interest-based G and F Funds, and the allocation shifts further toward G and F every quarter. New federal hires are defaulted into an L Fund, so moving out of it is the first step for a Muslim employee. The equity portion can be rebuilt manually with C, S and I.
Can I buy a halal mutual fund inside the TSP?
Possibly, through the mutual fund window. You need at least $40,000 in the TSP, an initial transfer of $10,000 or more, and no more than 25% of your balance in the window. Fees are $132 a year plus $28.75 per trade. The fund list is visible only after login, so confirm that a screened fund such as Amana, Iman or Azzad is available before paying.
Should a Muslim federal employee opt out of the TSP?
Usually not. FERS and BRS participants who contribute 5% receive a total of 5% from their agency, which is earned compensation. Opting out forfeits it without any Shariah benefit, since you can allocate to stock funds and avoid G and F entirely. Contribute at least 5%, allocate carefully, and put saving above that into a halal IRA.
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What is the 2026 Roth catch-up rule for the TSP?
From January 1, 2026, participants who earned more than $150,000 in 2025 and whose contributions exceed the elective deferral limit must make their catch-up contributions as Roth. tsp.gov says the switch is automatic for most people and that the first Roth catch-up creates a Roth balance if you do not have one. Those at or below the threshold keep their current election.
