By Amy Miller, AFC®
I’m a little ashamed to say this as a military spouse of many, many years, and a former investment advisor but until I recently participated in the Thrift Savings Plan (TSP) Webinars, I can’t say that I fully understood the plan or its options.
What is TSP?
The Thrift Savings Plan (TSP) is very much like a 401K offered by civilian employers. Basically – it’s the government’s rendition of a retirement savings program for both U.S. federal government employees and military members.
It is both a defined contribution plan and a tax-deferred retirement plan with annual contribution limits like a 401K. (2022 limits are currently $20,500 per person with an additional $6500 per year catch-up option for those over 50)
Federal employees that are part of the FERS (Federal Employees Retirement System) hired after July 2010 are automatically enrolled with a contribution of 3% of their basic pay that is deducted each payroll period.
It is also a key component of the BRS (Blended Retirement System) and participants receive matching funds up to 5%. If you joined the uniformed services after Oct. 1, 2020, you were automatically enrolled into TSP Lifecycle (L) Fund at 5%.
TSP Investment Options
TSP has 5 main options that you can choose from plus one additional known as the “L Fund” or Lifecycle fund. Here’s a quick rundown of them – you can learn more about each here: TSP Funds.
-G Fund: Short Term U.S. Treasuries
-F Fund: U.S. Corporate Bonds
-C Fund: Large U.S. Companies (S&P 500)
-I Fund: International Fund
-L Fund: Lifecycle Funds (diversifies among the above funds using a targeted retirement date –
there are currently 10 lifecycle funds available)
*it’s important to note that the default fund is the G Fund unless a selection has been made, unless you enrolled in the Blended Retirement System (BRS) after January 1, 2028, then your default is an age-appropriate L Fund
The program now also offers the option of contributing to a Traditional (before tax) or Roth Plan (after taxes). I won’t go into too much detail on the difference – for now, I’ll say that there are benefits to both, so do your homework to decide what is best for you.
TSP Webinars
As I mentioned earlier, I recently attended ALL the webinars offered to detail the options available under TSP and learned A LOT! They offer the following topics, covered in one-hour virtual webinars:
-Welcome to the New TSP – Making the Best Plan Even Better
-Intro to TSP
-TSP Contributions: Taking Control of Your Future
-Turning 50? Things you need to know about your TSP
-TSP Death Benefits
-TSP In-Service Withdrawals
-TSP Investment Funds
-TSP Loans
-TSP Distributions
-TSP Early to Mid-Career
-TSP Pre-Separation
-TSP to Retirement and Beyond
Each of these webinars is scheduled at least once per month – some twice. The September, October & November dates have recently been announced. You can find their current class schedule and register here: TSP Online Learning
A few other things to consider
Maybe you are well versed in TSP and know exactly the plan your money is going into and are happy – and that’s great! You’re probably a step ahead of most of your peers. However, I have coached several individuals in the past that thought they had everything in order and then found out the hard way, that they didn’t so here are a few things that you should review periodically to ensure it is all up to date and correct:
-Address: Did you update it after your last PCS?
-Beneficiaries: Marriage? Divorce? New Baby? I once had a client that did not take the time to update their account and left their ex-spouse as the beneficiary, leaving the new/current spouse and children to find out they were not going to be receiving anything upon his unfortunate and unexpected death, and all too common of an error. It is also important to make sure you have contingent beneficiaries named.
-Contributions: When is the last time you adjusted your contribution amount? A good rule of thumb is to do so EVERY time you get a promotion – it’s money you won’t miss since you haven’t already been earning or spending it…. you’ll thank yourself in retirement!
-Tax Free Contributions: You can make tax-free contributions during deployments in a combat
Zone
You can find more information on the Thrift Savings Plan, fund performance, contribution limits, and the webinars I’ve discussed by visiting: https://www.tsp.gov/