Everything You Need to Know About the TSP

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TSP

You need to save for your retirement. Your military pension will not be enough to sustain you through all of your retirement years. The Thrift Savings Plan (TSP) is a benefit provided by the Department of Defense (DoD) to help you save money for your golden years.

Today we have a special episode of the MilMoney Movement podcast. Hank and Lacey break down everything you need to know about the TSP to help you start saving for your retirement. Here’s a preview of this special episode.

What is the TSP

The TSP is a retirement saving account for military service members and federal employees. It is similar to a civilian 401k.

Defined contribution vs defined benefit plans

The TSP is a defined contribution plan which means you make contributions from your pay to your TSP account to save money for retirement. The military’s retirement or pension is a defined benefit plan. A defined benefit is when you complete some time retirement, for the military it’s 20 years, after that, you continue to receive monthly payments as if you were still working.

Matching in tax-advantaged plans

To receive matching contributions from the DoD you must be in the Blended Retirement System. There are no matching contributions from the DoD for Service members in the Legacy System.

Contributions limits

Currently, you’re able to contribute $18,500 to your Thrift Savings Plan. If you’re over 50, you can give an additional $5,000 each year. A great way to grow your retirement is to increase your savings each time your income increases.

Roth vs Traditional Thrift Savings Plan

The Roth and Traditional TSP are different tax treatments for your retirement savings account. The Traditional means you will pay taxes on your contributions and earnings when you take the money out in retirement. The Roth version of the TSP means you pay taxes on your contributions as you earn them and your earnings will be tax-free when you take the money out.

TSP Funds

There are five different funds, the G, F, S, C and I funds. They also have lifecycle funds you can select.

Getting Help

Blooom is a resource you can use to manage your TSP. They will optimize your 401k in minutes and give you access to a financial advisor.

TSP Loans

You may be eligible to take a loan from your account but serious consideration should be taken before making that decision. Borrowing money from your retirement accounts can have a negative effect on your retirement income.

Withdrawals after leaving service

You are not able to take money from your account until you are 59 and ½ without taxes and penalties. When you do decide to start drawing on your TSP you can either do a partial or full withdrawal.

Learn more about what you need to know about the TSP in this episode of the MilMoney Movement podcast.

What’s on Lacey’s Mind

This week it’s on should you retire early, even if you can.

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