Pieces of a Pie: How to Start Saving for Retirement Right Now

A hand places the fourth colored 'slice' into a pie-chart type of pie on a wood surface.
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Thinking about retirement is hard. How much money will you need, and where will it come from? But the more you think about it, the easier it is to get your head around some basic ideas, such as the likelihood that your retirement income will come from a variety of sources.

Understanding this concept is the first step in creating those different sources of income. These sources may include all sorts of income: the Thrift Savings Plan, individual retirement accounts (IRAs), Social Security, disability compensation from the Department of Veterans Affairs, a civilian 401(k) or similar plan, taxable investments, military retirement pay, continued work and other sources.

Having multiple sources of income in retirement generally means more income, but a good mix may also provide protection from some of the risks of retirement income. For example, Social Security is guaranteed for life and has a built-in adjustment for inflation. On the flip side, funds in your TSP account may grow a lot, depending on your investment choices.

Imagining your retirement income as pie pieces can make the planning process less overwhelming. Instead of trying to put together everything, all at once, you can tackle one piece at a time. Then you grow on what you've started. Over a lifetime, you can put together enough pieces to make a full pie that will give you the income you need in retirement.

The first step is to figure out the options that may be available to you. Some options require you to take action now. Other things happen automatically. The second step is to do whatever you need to do to unlock those options that require action.

Piece of the Pie: Thrift Savings Plan

Every military member has access to the Thrift Savings Plan and can make contributions directly from their paycheck. Service members under the Blended Retirement System (BRS) get automatic government contributions to TSP and matching funds on the first 5% of their base pay that they contribute.

Action required: Contribute to TSP. If you're in the BRS, be sure to contribute at least 5% to get the maximum government matching funds. Increase your TSP contributions with each pay raise, including annual raises, time-in-service raises and promotions.

Piece of the Pie: Individual Retirement Account

Every service member can open an individual retirement account (also called an individual retirement arrangement), or IRA. These can be with a bank or credit union, or they can be with an investment company. Spouses can have IRAs, too, even if they don't have their own earned income. (Saving money for each half of a couple can be a powerful tool!)

Action required: Open an IRA and set up an automatic transfer to fund it each month. If you are married, open an IRA for your spouse. Even if you can afford only $10 a month, get started. Make it a goal to increase those contributions as your finances improve.

Piece of the Pie: Social Security

Service members earn Social Security benefits, and they don't need to do anything to make that happen. Working spouses earn Social Security benefits, and spouses who never worked outside the home can collect some Social Security benefits as well.

Action required: None!

Piece of the Pie: Civilian 401(k)

Spouses who work may have access to a 401(k), 403(b) or similar tax-advantaged retirement account. Many of these accounts include matching funds from the employer. Post-military work may have those same benefits. Be sure to contribute at least the amount required to get the maximum matching funds -- it's free money!

Action required: If you or your spouse has access to a 401(k), 403(b) or similar tax-advantaged retirement account, set up automatic contributions through payroll deductions. Strive to increase contributions each year.

Piece of the Pie: VA Disability Pay

If you've left the service, you may be eligible for VA disability compensation based on conditions caused by or aggravated by your military service.

Action required: If you think you might be eligible for VA disability compensation, apply for it. A state or county veterans service officer or a veterans service organization can help.

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