Paycheck Chronicles

Pay Change? Check Your TSP Contributions


One thing about the military:  as soon as you get your pay settled, something will happen to change it.  Whether it's a PCS move or a promotion or a new year's raise, military pay changes a lot.  If you're trying to meet certain goals with your Thrift Savings Plan (TSP) contributions, your change in pay status may require you to change your TSP contribution rate.  On the other hand, depending on your pay change, not changing your TSP contributions might allow you to painlessly increase your savings.

TSP contributions are allocated through your myPay account, and you can allocate a whole percentage amount of each of your base pay, special pays, and bonuses, up to the contribution limits for the year.  If you get a promotion or a pay raise, keeping your percentages the same will help you save a little bit more.  If you're one of the amazing few that is already contributing the max to your TSP account each year, then you might need to decrease your percentages a smidge to get the desired end result.

The new year, with its pay raise, is the perfect time to up your TSP contributions without having a smaller take-home paycheck.  This year's 2.1% pay increase is a great opportunity; you can increase your TSP contributions by 1% and still enjoy an increase in your take-home pay.  Better yet, increase your TSP contributions 2% and you'll still have close to the same pay with a much better savings rate.

Over 80% of military members do not continue serving until they earn a military retirement.  For these service members, TSP and IRAs will be the only retirement savings that they have when they leave the military.  Not contributing to TSP could mean leaving the military with no tax-advantaged retirement savings.   That's kind of a bummer, especially when TSP has some of the lowest fees in the industry.

Take a few minutes and see if your TSP needs to be adjusted for 2017.

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