Leaving the Military? Stay with the Thrift Savings Plan (TSP)

Save and Serve PosterBy Abigail Reid, Writer-Editor, Federal Retirement Thrift Investment Board

You may be leaving the military, but that doesn’t mean you have to leave the TSP. Keep reading to learn some of the great reasons to stay.

The TSP offers you low fees. Saving for retirement isn’t free, and some retirement plan fees can take a big bite out of your savings. The TSP has low administrative fees so you can keep more of what you save. Over your career, this can add up to thousands of additional dollars in retirement.

The TSP gives you the freedom to change how you invest. Even though you can no longer contribute after you separate, you can roll money into your TSP account from other qualified plans or IRAs andyou can change your investment mix by making an interfund transfer. Make sure you understand how interfund transfers work, especially if you have a Roth balance in addition to a traditional balance in your TSP account.

The TSP offers you smart, simple choices. When it comes to saving for retirement, more investment options aren’t always better. Too many options can be confusing and difficult to manage. The TSP offers you smart, simple choices. You can invest in five individual funds(G, F, C, S, and I) that cover most of the investment landscape.

Or, if you aren’t sure how to invest among the five funds, consider the TSP’s Lifecycle (L) Funds. The L Funds—L 2050, L 2040, L 2030, L 2020, and L Income—are professionally designed to balance the expected risk and return associated with each of the five funds. Just choose the one most closely associated with the year you plan to need your money.

Want to make things really simple and make the most out of your TSP account? If you have other eligible retirement plans, think about transferring them into the TSP. Check out our YouTube video, “Combine and Save,” to learn more.

Now that you know some of the great reasons to stay with the TSP, here are some important tax items to keep in mind as you move forward:

Be mindful of the early withdrawal penalty tax. You can leave your money in the TSP until you turn 70½. However, if you withdraw money from your TSP account before you turn 59½, you could be subject to a 10% early withdrawal penalty tax. Read the TSP’s tax notice, “Important Tax Information About Payments From Your TSP Account,” to learn more.

Don’t let your loan linger. If you have an unpaid TSP loan when you separate from service, you must repay it in full within 90 days of the date when your service reports your separation to avoid having the IRS consider it taxable income. To pay off your loan, complete and submit a loan payment couponto the TSP. To learn more about TSP loans, refer to the TSP’s Loansbooklet.

The TSP is here to help after you separate from service. We want you to continue to receive your statements and other timely information after you separate. Make sure your address is correct by visitingtsp.gov or calling the ThriftLine at 1-TSP-YOU-FRST. Also check out our YouTube channel, TSP4gov, where you’ll find short, educational videos about managing your TSP account. Follow us on Twitter @tsp4gov and you’ll get current, informative messages as well as easy access to tools that will help you make the decisions that are right for you.

Remember – the TSP is a retirement plan that you can keep no matter where your career takes you.

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