Paycheck Chronicles

Military Saves: Save For Retirement


Today's Military Saves Week focus is Saving for Retirement.  It's vitally important that you have your own retirement savings.  Social Security doesn't provide enough income for most people to live comfortably, and more than 80% of service members leave the military before earning retirement.  (And sometimes not by choice, which is a whole 'nother issue.)

Military service members have two ways to save portable retirement savings:  the Thrift Savings Plan (TSP) and an Individual Retirement Arrangement (IRA) account.  Both are good, but the TSP has some benefits that you can't find in an IRA.

First, TSP contributions come straight out of your military pay.  Easy-peasy, and it won't mess up your bank account if you forget that it will be deducted.

Second, you can change your TSP contributions and account holdings quickly and easily via your online myPay account and TSP online account.

Third, TSP's fees are incredibly low.  All retirement savings accounts have fees, many of which are obscured within the structure of the product.  Though costs vary widely, the industry average costs are somewhere around 1.00%  (you'll see different figures quoted different places.)   TSP expenses are just .038%.  That means for every $1,000 invested, you'll pay TSP 38 cents in administrative fees, vs. an average of $10.00 for other retirement investment accounts.  No, that's not a typo.  That's how incredibly cheap TSP is compared to other investments.  If you save 100,000, you'll be paying about $1,000 a year in fees if you go with an account that has an average fee cost.  Every year.  That could equal a whole lot of money over time.

There is a fourth reason why TSP is a great choice, but it doesn't come into effect until 1 January 2018, and it's not available to everyone.  If you choose the military's new Blended Retirement System (BRS), you'll receive government matching funds on the first five percent of your pay that you contribute to TSP.  That's free money!

Saving for retirement is important, and military members are fortunate to have access to TSP.  You can contribute as little as 1% of your base pay.  It won't change your take-home pay by much, but over the years you will build up a nice little retirement account. Get set up in TSP today, and start saving for tomorrow.


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