Let’s talk about the Thrift Savings Plan or TSP. From what I have seen, this is a military benefit which many reservists do not even realize they have. For this reason, it is often underutilized. Obviously, this is due to a lack of information. Here are a few basic points about the Thrift Savings Plan which you may find useful. This will be the first in a series of articles about the TSP.
For starters, as “The Hitchhiker’s Guide to the Galaxy” (a comedy novel by Douglas Adams, for those who may not know) says in large letters on its front cover, DON’T PANIC! Yes, the Thrift Savings Plan is an investment plan. Yes, there is a lot of information about it. Do not let these things scare you away.
This plan has been made as simple as possible to help you make decisions without being overwhelmed by the numbers. If you’re a number junky like me, the numbers can be found and endlessly analyzed to your heart’s content, but most people want simplicity. The TSP is that simple plan. You can use it to build another retirement on top of the one you are earning from the military.
I’m not going to go in depth on this topic today. Instead, I’m going to break this up into a series of articles which describe small, easily digestible pieces. Look for more on the TSP as time goes on.
The Thrift Savings Plan is an investment plan similar to a 401(k) plan. This plan was originally only available to federal employees but was opened up to the uniformed services in 2002. The TSP is what is called a qualified plan. This simply means the plan is authorized by federal law and there are tax advantages to using a plan of this type. There are two basic types of TSP account, traditional and Roth.
A traditional TSP plan lets you contribute money to the account before taxes are taken out of your pay. In short, this means you pay less in taxes right now. Later on when you withdraw the money upon retirement, you pay taxes on the funds you have contributed and any earnings on them.
A Roth TSP plan lets you contribute money to the account after taxes are withheld. There is no immediate tax advantage but you pay no taxes on the contributions and any earnings when you withdraw the money upon retirement.
The minimum age at which you can withdraw your money without a penalty is age fifty-nine and a half. If you remove your money before this age then you will pay taxes and penalties on some or all of the amount you withdraw.
The full-time staff in my unit are telling me I cannot participate in the TSP because I am not on active duty.
This is one of the biggest myths existing in the reserve components of all branches and not just for the TSP. There are people out there are telling reservists they cannot use a variety of benefits because they are allegedly for active duty members only. Some of the benefits about which these erroneous statements are being made are the G.I. Bill and other educational benefits, the TSP, Tricare medical coverage, and even retirement itself.
None of these – let’s call them what they are – myths are true. While benefits may be slightly different for reservists in some cases, they are usually exactly the same as our active duty counterparts. The TSP is one of those which is the same. You can participate in it if you so choose.
I will explain other aspects of TSP in future articles. Consider this to be small bite number one. More will follow soon.
Thanks for joining me today and, of course, thank you for your service.
Global Pay Self Service (Coast Guard) (https://portal.direct-access.us/)
Thrift Savings Plan Website (http://www.tsp.gov)
Related YouTube Episodes:
The Basics of Reserve Retirement (http://rcretirement.com/2017/01/18/the-basics-of-reserve-retirement/)