Thrift Savings Plan Explained
This post contributed by Marcus from A Solider’s Perspective.
The federal government’s retirement plan, called the Thrift Savings Plan, is one of the more overlooked benefits when examining the benefits of military service. I’ve been contributing a very small portion of my salary for the last four and half years or so and I can’t say I thought about it at all until about a week or so. The only reason the program came to the front of my mind because I was asked if I was investing for the future. My first answer was no, then I remembered TSP.
TSP works by allotting a percentage of your pay before taxes and then investing it into one of the funds offered. There are several funds with differing amounts of risk to your investment, but all of them performed pretty well over the last ten years or so considering dips in the overall market including the dot com bubble burst in the late 90s and post 9/11.
This week I started an aggressive investment strategy with TSP that included upping my contribution and taking advantage of the Lifecycle funds, or L fund for short. I specifically invested in the L 2040 fund since my target retirement date is somewhere in the area of 2040. The fund automatically invests your money between the other TSP funds based on how close you are to your horizon date.
This means I start out with a majority percentage of funds that give a high return rate with a bit of risk and a small percentage of the lower return rate and more secure funds. Every year the percentages will slowly shift to a more conservative strategy as I grow closer to retirement. I think this is a great investment for me at this time. This is only one option open to those involved with TSP.
Making wise investments early is the key to a secure retirement. Investments are not generally something young Marines making a career of the military think about. We are more concerned with getting the top of the line car, stereo system, electronics, etc than ensuring our future years will be free of worry.
I am in a great position to help impress on Marines looking to make a career of the military the importance of investing in addition to the portion of our base pay we receive for the rest of our lives after serving 20 years. TSP is a great option since our contribution into TSP is taken before taxes and is at less risk compare to other investment options since we don’t have to worry about a company going under and taking our retirement with it.
