By Alecia D. Blair, Military Saves Communications Associate
Let’s face it. A military pension and social security will likely not be enough to sustain a comfortable standard of living during retirement. So, enhance your retirement savings for tomorrow by enrolling and saving automatically in the Thrift Savings Plan (TSP), an Individual Retirement Account (IRA) or other employer-sponsored retirement plan today.
Thrift Savings Plan (TSP)
The Thrift Savings Plan is a government-sponsored retirement savings plan for military service members and federal civilian employees. Established by Congress in 1986 as part of the Federal Employees’ Retirement System Act, the TSP offers many savings and tax benefits worth exploring.
Depending on whether you choose the Traditional TSP or the Roth TSP, contributions are tax deferred or are tax free when withdrawn under specific circumstances, according to Military OneSource.
Moving on after the military? You can take the TSP with you wherever life takes you. Whether you separate early from the military or earn a military retirement after 20 years, the TSP is yours to keep.
If you are separating from the military, research whether rolling over your TSP is right for you.
To learn how to sign up for the TSP, make a contribution election and access your account after signing up, read “Sign Up and Save with the Thrift Savings Plan.”
Individual Retirement Accounts (IRA)
Another tool to help you supplement your military retirement income and social security is the individual retirement account (IRA)— a savings account that you can set up through your financial institution, advisor or life insurance company. Before doing so, consider the different benefits to the traditional versus Roth IRA.
According to the Internal Revenue Service (IRS), the maximum you can contribute for 2015 for traditional and Roth IRAs is “$5,500 if you’re under age 50.” Learn more about IRAs today and take advantage of this retirement tool.
Employer-Sponsored Retirement Plans
It’s possible (and likely) that you’ll have a second career after retiring or separating from the military. With time on your side, this provides the perfect opportunity to enroll in an employer-sponsored retirement plan at work if one is offered.
The most common forms of employer-sponsored retirement plans are the 401k, and 403b (public schools and certain tax-exempt organizations) and 457b (government employers). Employees make contributions to these accounts from their wages prior to taxation and pay taxes when the money is withdrawn at retirement.
Some employers may even match your contributions, and employees may elect to make contributions automatically from their wages. Take advantage of this opportunity to set your retirement savings on autopilot, and enroll. Learn more about saving at work through these retirement tools, now!
“Set a goal. Make a plan. Save automatically.” Save now, and retire comfortably later on.
Alecia Blair works for Military Saves, managed by the nonprofit Consumer Federation of America (CFA), which seeks to motivate, encourage, and support servicemembers and military families to save money, reduce debt, and build wealth. Learn more at militarysaves.org