Don't Lose Out on TSP Matching Funds

Piggy bank with letters "TSP" on in symbolizing the Thrift Savings Plan
(Adobe Stock)

You may know that the government will match your contributions (up to 5% of your basic pay) to the Thrift Savings Plan (TSP) if you are covered under the Blended Retirement System (BRS). This may make you want to contribute as much as possible to the TSP as early as possible. But beware: Doing so could mean you miss out on thousands of dollars!

Blended Retirement System and the TSP

If you joined the military on or after Jan. 1, 2018, or you opted into the BRS, the government will automatically contribute an amount equal to 1% of your basic pay to the TSP even if you don't contribute any money yourself. If you do pay into the TSP, the government will match your contribution, up to a maximum of 5% of your basic pay.

If you joined the military on or after Jan. 1, 2018, you have to wait 24 months for the additional matching funds. If you switched over to the BRS from another retirement system, you can get the additional matching funds from Jan. 1, 2018, the date the BRS became effective.

That means if your monthly basic pay is $1,000 and you contribute 5%, or $50, the government will match that, giving you a total contribution of $100 each month. If you contribute less than the maximum amount, the government's contribution will also be less.

That's a pretty good deal: You can automatically double your money. But what if you contribute 10% of your basic pay? Well, the government contribution maxes out at 5%, so unfortunately you won't get more than the 5% government match.

Contribute as Much to the TSP as You Can

You may also know that you can contribute up to $23,000 to the TSP in 2024.

Most experts say that you should contribute as much money as possible into a retirement fund as soon as you can, so you can live it up after you retire. To this end, how can you get to that magic maximum contribution of $23,000?

Since the annual maximum contribution is $23,000, you divide that by 12 to get a maximum TSP contribution of $1,917 each month to reach the goal.

Sounds like a lot of money? It is -- more than half of your base pay if you're an E-5. Maxing out your contributions isn't easy to do.

You have to remember that you still draw special pays and all your allowances along with your basic pay every payday. If you're on deployment, there may not be a lot of places to spend your money, and, if you get a bonus, you can contribute that money to the TSP, too.

Be Careful Not to Cheat Yourself Out of Matching Contributions

Should you put all that extra pay or all those bonuses into your TSP as soon as you get them? The answer is a resounding no!

If you reach the maximum TSP contribution limit before the end of the year, your TSP deduction will automatically stop. And, without your monthly contribution, there will be no DoD matching contribution. That's right: Once your TSP contributions reach the annual maximum contribution limit, finance will stop them. That means the matching funds will stop.

The automatic 1% government contribution will go on, however.

If you do get a big bonus, you can put it into a bank account and then kick your TSP contributions up to the monthly max. You can withdraw money from the bank each payday to make up the difference. Plus, you make a little interest as well.

So, if you get a bonus or deploy, don't max that TSP out just yet. Check your contributions to make sure you won't lose those matching funds. Free money is a terrible thing to waste!

Special Rules for Combat Zones

If you are deployed to a combat zone, you may be able to contribute up to $66,000 to your TSP in 2024, but the government contributions remain at 5% of your basic pay.

Be aware that the additional combat zone contributions are limited depending on what type of TSP you have, Roth or Traditional. If you have a Roth TSP, you are limited to the normal maximum of $23,000. The Traditional TSP plan has the $69,000 limit.

The special combat zone limit also comes with rules about the government-matching 5%, so if you’ve got that kind of money and time, you should do your homework before investing.

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