The Thrift Savings Plan
Are you taking advantage of one of the most important benefits offered through your service in the Army National Guard?
The Thrift Savings Plan (TSP) is a long-term retirement savings and investment plan for federal employees and members of the uniformed services. Established by Congress under the Federal Employees’ Retirement System Act of 1986, the TSP offers similar savings and tax benefits that many private corporations offer their employees under 401(k) plans.
With the recent pay raise for uniformed personnel, now is a great time to join the TSP and get serious about long-term finances. In the last five years, the average military pay raise averaged 1.5 percent. Effective Jan. 1, 2019, service members received a pay raise of 2.6 percent. The remarkable raise for service members creates a great opportunity to invest more toward the future.
The TSP is a defined contribution plan, which means the income received from a TSP during retirement is dependent on how much participants (and their agency, if they are eligible to receive agency contributions) put into the account during their working years and the earnings accumulated over that time.
The TSP has numerous benefits, including:
- Low administrative and investment expenses
- Automatic payroll deductions
- A diversified choice of investment options, including professionally designed life-cycle funds
- A choice of traditional (pre-tax) contributions or Roth (after-tax) contributions
- Catch-up contributions, if you are age 50 or older
- A beneficiary participant account established for your spouse in the event of your death
- A variety of withdrawal options
- Under certain circumstances, access to your money while you are still employed by the Federal Government
- Agency/Service matching contributions, if you are an employee covered by the Federal Employees Retirement System (FERS) or a member of the uniformed services covered by the Blended Retirement System (BRS)
Investing the pay raise in the TSP is a great way to improve long-term finances and secure a financially stable future. If Soldiers split their raise between their wallet and their retirement, they can take a 1.3 percent pay raise while still investing in their future. For example: an active duty E5 with eight or more years of service will receive a raise of about $80 per month or $960 for the year. The same reserve component member can expect an extra $10 for a weekend duty, depending on the number of duty days. If the Soldier puts half of their raise towards their TSP, that adds up to $480 each year. Continuing that process will create a large TSP balance from which Soldiers can withdraw funds to ensure continuing financial stability once they retire.
Service members and federal citizens have the opportunity to participate in the TSP at any time. Service members who joined after Jan. 1, 2018, and those in the BRS are automatically enrolled in the TSP. Other service members may enroll through myPay or the TSP website.
The TSP website provides support to participants through various planning and informational tools, such as program tutorials, investment strategies and online calculators that help service members and federal civilians plan for a comfortable retirement. The Department of Defense also has financial counselors at most active duty locations, who are also available to reserve component service members through Military OneSource.
Go to www.tsp.gov for more information or to enroll in TSP today.
By Contributing Writer Craig Ekman and Staff Writer Tatyana White Jenkins
