Thrift Savings Program (TSP) users will be able to contribute more money to the retirement plan in 2018.
Starting on January 1, active duty troops, most reservists and civilian government employees will be able to contribute up to $18,500 a year to their TSP accounts -- that’s $500 more than in 2017. Employees over 50 years old can also contribute an additional $5,000 a year in "catch-up" contributions.
The TSP is a Federal Government-sponsored retirement savings and investment plan.
TSP Has Many Different Investment Options
The TSP has 5 different funds members can contribute to:
- the "C Fund" - stocks which are in the S&P 500 index
- the "S Fund" - stocks of U.S. companies not included in the S&P 500 Index.
- the "I Fund" - international stocks
- the "F Fund" - corporate bonds
- the "G Fund" - government securities such as Treasury bills
Some of these funds are risky, meaning that while you may make a lot of money on them, you could also lose a lot of money, just like poker night after payday. Some funds are conservative, slow and steady, but smaller gains.
There are also Lifecycle or "L Funds," which are made of differing mixes of the five different funds. The mix of these funds changes based on your retirement age.
Currently the TSP offers the L2020, L2030, L2040, and L2050 funds. These are designed for someone retiring in each of those years. The L Funds make it easy to invest your money without having to be a wizard investor.
The TSP also has a conventional and Roth investment option. The conventional option allows you to deduct your contributions from your income when you pay taxes now, and pay taxes on any interest earned later when you take the money out in retirement.
Under the Roth option you take no tax deduction now, but have tax-free withdrawals and interest when you remove the money after retirement. Usually Roth is considered a better deal.
TSP For The Military
All active military members and some ready reserve members may contribute to the TSP program.
In January 2018 the Blended Retirement System (BRS) will begin for new service members. Current members who have less than 12 years active service will have the option of enrolling in the BRS.
All service members under the BRS will automatically be enrolled to contribute 3 percent of their base pay to the TSP (they can change this at any time). BRS participants will also get a new TSP matching contribution of 1 percent of their base pay from the government. For an E-5 with 6 years this will be around $340 a year.
After 2 years, the government's matching contribution will go up to 5 percent of your base pay. That means if you contribute 5 percent or more of your base pay to the TSP, the government will put in another 5 percent. With the matching funds component of the BRS your savings can be automatically doubled.
TSP After You Leave The Military
The beauty of the TSP is that you can take it with you when you leave the military. You don't have to be a lifer to get a retirement benefit anymore. Yes, you are limited on what you can do with your TSP money, usually you can't take it out until you retire unless you get a loan from it - take the money out and pay it back in 5 years (or 15 years if you use it to buy a house).
You can also take your money out of the TSP and put it into a different retirement plan. If you get a government job after you leave the service you can continue putting money into the TSP account.
If you take it out for any other reason you may have a tax penalty.
Most financial experts agree that you should enroll in the TSP or a similar retirement plan as soon as you are eligible, and you should contribute as much money as possible towards your future retirement.