By Beth Perry, Federal Retirement Thrift Investment Board
April is Financial Literacy Month, the perfect time to reevaluate your spending habits. Can saving $100 today mean having $100,000 in the future? It can if you use time to your advantage. The Thrift Savings Plan (TSP), a low-cost retirement plan for military and Federal civilian employees, helps you do that. Thousands of military members younger than 35 already have $100,000 or more in their TSP accounts. Start now, and even a little can mean a lot.
How $100 can become $100,000. Time is your biggest ally when it comes to the growth of your savings. Let‚Äôs say your basic pay is $2,000 per month, and you save 5% of your pay in your TSP account. That‚Äôs about $100 each month. If you leave the military after 10 years, you could have more than $17,300.* Even if you never add more money, that $17,300 could grow to almost $100,000 in 25 years.*
And consider this: If you contribute 10% of your pay the same way, you could have almost $200,000.* Can‚Äôt afford $100? Every dollar makes a difference. Plus, you can contribute incentive, special, and bonus pay. To start or increase your contributions, sign into myPay and choose the ‚ÄúTraditional TSP and Roth TSP‚Äù option.
Our Roth option could work for you. ‚ÄúRoth‚Äù means you pay taxes on the money you save before it goes into your TSP account. So you pay no income taxes when you take it out, and your earnings can also be tax-free if certain conditions are met.** And any combat zone pay you receive is always tax-free. If you contribute it to our Roth option (and meet certain conditions**), that money can grow tax-free as well.
You can take us with you. Your TSP account is yours to keep whether you‚Äôre with the uniformed services for 2 years or 20. Plus, if you take a Federal job after the military, you can keep contributing to the TSP. Even if you don‚Äôt take a Federal job, you can manage your investments at low cost while your savings grow.
Managing your account. Remember, use myPay to change your TSP contributions‚Äînot the TSP website. If you‚Äôd like to change the funds you invest in, log into My Account at tsp.gov and choose ‚ÄúContribution Allocations‚Äù or ‚ÄúInterfund Transfers‚Äù on the left. To reset your password, call us at 1-877-968-3778 and choose option 3.
* Figures are based on the L 2050 Fund‚Äôs projected long-term returns. Returns are not guaranteed and may be substantially less.
** Roth earnings are paid tax-free if 1) you have reached age 59¬Ω or have a permanent disability and 2) five years have passed since the year of your first Roth contribution.