|
Military
Thrift Savings Plan |
|
Information about the Thrift Savings Plan for US Military
service members |
The Thrift
Savings Plan (TSP) is a Federal Government-sponsored
retirement savings and investment plan. The National Defense
Authorization Act for Fiscal Year 2001 extended participation
in the TSP, which was originally only for Federal civilian
employees, to members of the uniformed services, and members
began enrolling on October 9, 2001.
The TSP offers the same type of savings and tax benefits that
many private corporations offer their employees under
so-called "401(k)" plans. The retirement income that you
receive from your TSP account will depend on how much you have
contributed to your account during your working years and the
earnings on those contributions. For more information on the
TSP, visit the official TSP website at
www.tsp.gov.
The Thrift Savings Plan (TSP) is a good vehicle for savings
because it is tax-deferred in pretax dollar savings. This
means that contributions come out of a member's income and
they are not taxed on it until they use that money later,
hopefully in retirement.
Many service members take advantage of TSP because it is an
attractive investment option with unique benefits for military
members. These benefits include saving for retirement and the
ability to complete tax-deferred or tax-exempt retirement
investments first.
Military members can contribute to TSP as soon as they become
a member of the uniformed services. They may elect to
contribute any percentage (one to 100 percent, subject to
mandatory deductions) of your basic pay. However, annual total
tax-deferred contributions cannot exceed the Internal Revenue
Service limit, which is $15,500 for 2008.
Deployed troops have different limits in TSP because their
income is tax-exempt and the IRS has a separate limit for that
category.
Those who are contributing to TSP from their basic pay are
allowed to contribute from one to 100 percent of any incentive
or special pay, including bonus pay. Elective deferrals are
tax-deferred amounts that participants contribute to TSP
instead of receiving it as pay. The contributions are not
considered taxable gross income for the year in which they are
contributed.
Catch-up contributions are supplemental tax-deferred
contributions available to TSP participants age 50 or older
who are already contributing the maximum amount of regular TSP
contributions for which they are eligible up to the maximum
IRS elective deferral limit. Catch-up contributions have their
own annual limit of $5,000 in 2007. Catch-up contributions are
invested in the TSP funds according to the most recent
contribution allocation.
Some new Army recruits who enlist in critical military
occupational specialties areas may also be entitled to receive
a matching contribution. Participants in the TSP Matching
Funds Pilot Program receive matching contributions on the
first five percent of pay that is contributed each pay period
of their initial term. The first three percent of pay that is
contributed is matched dollar-for-dollar; the next two percent
is matched at 50 cents on the dollar.
Another major benefit is that the expenses on the accounts are
very low, about one-tenth of the average private mutual fund.
TSP also has a loan program for special situations such as a
first home purchase, where participants can borrow money from
their own account and then pay it back at a market interest
rate. Finally, the money in TSP can also be rolled over to
another IRA account.
Service members who leave active duty and join the National
Guard or Reserve will still have TSP because they can invest
in it whenever they're on active duty. They can even
contribute a percentage of their weekend active duty pay.
|
|
(Source:
US Department of Defense) |
|
|
|
