The Thrift Savings Plan is is retirement plan offered to US Government workers. The TSP has historically been utilized more by federal employees than military service men and women. However with the military changing to Blended Retirement System will dramatically increase the use of the TSP within the military. Here are 5 things I love about the TSP.
1) Low Fees
You will be hard pressed to find a cheaper way to invest than the Thrift Savings Plan. In 2017 The TSP boasted an average net expense of just $0.33 per $1,000 invested. To put this in prospective in the average net expense for large employer 401k (private sector equivalent to TSP) plans was $5 per $1,000 invested. The TSP is an efficient way to start saving for retirement.
2) Automatic Savings
Contributions to your TSP are directly debited from your pay. Conveniently you do not have to remember to transfer money from your bank account it is taken out before you could spend it. You just indicated what percentage of your pay you would like to contribute. You can adjust the percentage through out the year as needed.
3) Roth Contributions
If you are active duty military and a one income household there is good chance you are in lowest taxable years of your life. Take advantage by utilizing the Roth TSP. The Roth option allows you to pay taxes today instead of when you take the money out in retirement.
4) Amount you can contribute
For 2018 you can contribute up to $18,500 into your TSP. That does not include the matching contributions. If you are deployed to a combat zone you can contribute even more into your TSP. If you really want to jump start your retirement savings work toward contributing the maximum amount allowed. Start small and increase it by 1 percent each year and by 5% anytime you make rank.
5) Decrease your Taxes
Sometimes you may want to decrease your taxes in a given year. You can do this by contributing to a traditional TSP. With the traditional TSP you do not pay income tax on contributions. However when you take money in retirement you pay taxes on both the contributions and earnings. For dual income households this can be useful tool to decrease your taxes or take advantage of certain tax credits.