The Thrift Savings Plan, aka the TSP, is the government’s version of a 401k. Even though it’s been around since the end of the 80s, many Service members still don’t use this opportunity to save for retirement. In my experience financially coaching and counseling members of the services, I’ve found that sometimes it’s because they don’t know how to start using the Thrift Savings Plan. Here’s a quick rundown of how to get going.
The Thrift Savings Plan
Getting The TSP Started
To sign up for the TSP, Service members must do so through their MyPay account (the government’s payroll system.) During the set-up process, you’ll need to choose if you want your account to be the Roth and/or the Traditional version. The Roth allows for after-tax contributions, while the Traditional are pre-tax contributions.
You’ll also need to decide if you would like to include contributions from other sources of income besides base pay, such as incentive pay and bonuses. There needs to be at least a 1% contribution from base pay to be eligible to contribute money from incentive or bonus pay. But please remember your selections. I’ve seen many shocked and confused as to why they didn’t receive their full bonus because a percentage of it went into their TSP.
Once you’ve elected the percentage of money to put in, the TSP will mail (snail mail) your account number and password. Then you’ll be able to log into your account on TSP.gov to select your investments.
Currently, the max a Service member can contribute into their TSP account is $18,000. That’s the equivalent of $1,500 a month. If you’re 50 years or older, you can add an additional $6,000 as a catch-up. For now, there are no matching contributions for military members. Of course, that will change with the new Blended Retirement System.
Once you receive your username and password, it’s time to select the investments you would like. The TSP website has an easy-to-understand matrix of their different types of funds. They even have an outline of the funds’ performance. Use these two guides to help select the investments that will work best for you. Also, you’re able to select more than one investment. Just decide what percentage of your money you’d like to go into each fund.
Don’t Forget About It
When you choose your investments, that isn’t it. There needs to be a follow-up to check-in on how your money is performing. Mark your calendar to review what’s going on with your investments every six months to a year. If you don’t like the performance, make changes.