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Those who joined the military with the intention of making it a career often begin to think about retirement after the first few years in the service. The military offers various retirement options for Servicemembers and Veterans, many of which are standard across the various branches of the Armed Forces. However, within the branch of the army, Servicemembers have the option of taking part in the Army Thrift Savings Plan. This is a blended savings and investment plan that offers many of the same types of benefits and tax breaks that private corporations provide through their own 401(k) plans. It is sponsored by the federal government and FDIC insured, making it an attractive option for army personnel planning for retirement.
What Is the Army Thrift Savings Plan?
The Army Thrift Savings Plan (TSP) is an investment and retirement savings plan for federal government employees and other uniform service members. This type of plan also includes the Ready Reserve. This program offers tax-deferred or tax-free savings options that are similar in practice to a corporate 401(k). Its purpose is to provide a retirement plan for those who qualify, and it is designed to supplement other retirement benefits, such as Social Security and the Federal Employees Retirement System. You can also use the military thrift savings plan in conjunction with your military retirement pay. It is administered by the Federal Retirement Thrift Investment Board, which is an independent federal agency made up of federal employees who are also Army TSP participants. They oversee the program on an annual basis.
Benefits of the Army TSP
The Army Thrift Savings Plan provides many benefits to its participants, including automatic payroll deductions, various investment options, both traditional and Roth TSP choices, and low administrative or investment expenses. It offers tax-deferred growth, matching contributions when applicable, and portability after service as well. The military TSP also gives several options for withdrawing funds, including partial withdrawals after separation and in-service withdrawals for those 59 years old or older. If the primary account holder dies, their spouse might also be eligible for death benefits through the military thrift savings plan.
Eligibility & How to Enroll in the Army Thrift Savings Plan
After 60 days of service, members of the uniformed services who began serving on or after January 1, 2018, are automatically enrolled in the Thrift Savings Plan (TSP) under the Blended Retirement System. Most United States government employees, including members of the U.S. Armed Forces, are eligible to participate in the Thrift Savings Plan. However, you do not need to be enrolled in the Army specifically to join the TSP—it is available to all branches of the uniformed services. The military thrift savings plan is fairly standard across all branches of the Armed Forces. The plan includes both active duty and reserve members from all branches.
Civilian federal employees are also eligible but may need to enroll through the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS). Those who are not in the Blended Retirement System but are still a member of uniformed services may need to make a contribution election to establish a TSP account, typically through the DEERS system. Once enrolled, you can visit mypay.com to adjust your contributions or, if you choose, opt out of contributions entirely—particularly if you have another retirement plan that you prefer.
Contribution Strategies & Fund Options
Once enrolled in the system, you have various options for contributions to the Army Thrift Savings Plan, depending upon your personal comfort level or needs. When it comes to retirement, regardless of the system you choose, there is a wide variety of advice and strategies offered by professionals, friends, and family, but if you are confused, consult a professional financial advisor first.
Your initial amount of contribution will depend on when you enroll in your particular system, but after your initial contribution, you can control how much is deducted from your paycheck or how much you contribute monthly to your military TSP to maximize your savings. The army TSP program offers a bit of flexibility, but for the most part, if you began service after October 1, 2020, you are automatically enrolled in the TSP, and 5% of your basic salary is deducted every pay period towards your TSP account. Between August 1, 2010, and September 30, 2020, the army enrolled you at a rate of 3% of your paycheck. If you were hired before August 1, 2010, you must make a contribution election through your agency or service to begin your contribution at the rate you choose.
Be sure you understand the basics of the plan you choose, whether or not it applies compounding interest, and do some research on the suggested investment allocations based on your age or duration in the service. If your system allows for matching contributions, consider them carefully before allocating them. Finally, choose between a Roth and traditional TSP based on your risk tolerance and retirement timeline. The traditional TSP allows for pre-tax contributions, meaning you do not pay taxes on them until you withdraw them, resulting in a tax break today by lowering your current taxable income. A Roth TSP allows for contributions made after you pay taxes, so your withdrawals are tax-free if you meet IRS requirements. Earnings are also tax-free.
Frequently Asked Questions About the Army Thrift Savings Plan
If you have further questions about the Army Thrift Savings Plan, read below some of the more common questions often related to the Army TSP.
TSPs are exclusively for federal employees and military personnel, while 401(k)s are for private sector workers. TSPs generally offer fewer investment options and lower fees, while 401(k)s may offer broader investment flexibility.
TSPs are exclusively for federal employees and military personnel, while 401(k)s are for private sector workers. TSPs generally offer fewer investment options and lower fees, while 401(k)s may offer broader investment flexibility.
Yes, you can contribute to both the TSP (Thrift Savings Plan) and an IRA (Individual Retirement Account).
To change your TSP contribution amount, you’ll typically use your agency’s or service’s electronic payroll system, not the TSP website itself. This system will enable you to initiate, modify, or cease your contributions. You can also use the TSP-1 Election Form if your agency requires it. All agencies and services have electronic payroll systems such as myPay, Employee Express, GRB, or LiteBlue. The Army TSP login is through myPay.
When leaving the Army, your Thrift Savings Plan account will remain open as long as your balance is $200 or more. You can choose to leave your money in the TSP, potentially taking distributions or transfers later. You can also transfer your TSP balance to another eligible retirement plan, like an IRA or a 401(k) offered by a new employer.
Yes, you can withdraw money from your TSP early, but there are potential consequences, including penalties and taxes.
In a given calendar month, you can reallocate your TSP investments a maximum of two times. After your first two reallocations, any further transfers within that same month can only be made into the G Fund. This restriction is in place to discourage excessive trading.
Traditional TSP contributions are deducted pre-tax, meaning you don’t pay taxes on the money you put in, and you’ll pay taxes on withdrawals in retirement. Roth TSP contributions are made with after-tax dollars, but withdrawals are tax-free in retirement.
TSP fund performance varies based on the specific fund and investment strategy, but generally, funds like the S and I funds, which invest in stocks, have historically shown higher returns than the G and F funds, which invest in bonds and fixed-income instruments. The L funds, which are target-date funds, adjust their asset allocation over time as the target retirement date approaches.
Yes, you can.
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