Paycheck Chronicles

4 Crummy Reasons To Take A Pass On The TSP

The military’s version of a civilian 401(k) — called the Thrift Savings Plan, or TSP — is a great way to build for the future. Yet more than half of service members pass on this opportunity.  Why would someone pass on the TSP?

At several Heroes at Home financial education events this spring, I asked people why they weren’t participating. They provided some great insight into what’s going through the minds of those who choose not to contribute to the TSP.

Here are some of the reasons I heard and why they shouldn’t hold you back from using the TSP to save for your future:

“I’m getting out soon and don’t have enough time.”

Even if you’ve only got a year or two left in the military, it can still make sense to contribute to the TSP. Why? First, you never know what the future holds. I’ve talked to many folks whose short-term plan to leave the military turned into decades of continued service. If that happens to you, you’ll miss out on years of contributions. Second, even if you do get out soon, you typically have the option of keeping the accumulated money in the TSP, rolling it over to your new employer’s plan or transferring it into an individual retirement account (IRA). In any of those scenarios, starting now allows you build for the future.

“I don’t have enough money.”

If that’s the case, rethink your spending. Most people can cut back enough to allow as little as a 1% contribution to the TSP. All you need to do is visit myPay and sign up to get things started. The TSP is a great tool to live a pay-yourself-first lifestyle. Because the contributions are deducted before the money hits your checking account, you’ll save first without the temptation to spend.

“Retirement, are you kidding me?”

OK, I get it. Retirement could be decades away. On a day-to-day basis, you’re faced with more pressing issues. However, if you put off building for the future, you’re ignoring one of your greatest allies — time. The power of compounding returns, or earning interest on your interest, can turn $50 or $100 monthly contributions into a six-figure retirement balance. Don’t miss that opportunity.

“I’ve got military retirement.”

The monthly paycheck from the military is a great benefit, the kind of retirement pension that many American workers no longer receive. However, at 20 years of service, it still represents only half your basic pay (no BAH, BAS or other allowances or pay). Most recipients will need to supplement it through retirement savings. And beyond that, less than 20% of those who serve actually qualify for military retirement. Finally, to get the most from the new blended military retirement system that’s coming in 2018, service members will need to make TSP contributions.

So, do any of those excuses sound familiar?

If you’re yet not contributing, start today, even if it’s a small amount. It would be great to see every service member contribute 10 to 15% of each paycheck, but a 1 to 2% contribution — easily set up at myPay — gets your foot in the door.

It’s a first step to building your future.


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