The Thrift Savings Plan (TSP) works as a 401(k) designed for federal employees. As an active member of the United States Marine Corps I have been allotting 10% of my paycheck since I was 19. Watching that nest egg grow (and ignoring it when it shrinks) has been the longest going financial investment of my life. I am extremely grateful for the government to open this program to active military members and now provides the option to recieve matching contributions under the Blended Retiremnt System (BRS).
Having been in for more than 12 years I am not eligible to convert into the new BRS. Fortunately I get to double dip in the High-3 system which has a higher rate pension and still receive the benefits of my ongoing TSP contributions.
The way the TSP portion of BRS works is the government automatically contributes 1% of a service member’s base pay and will match up to an additional 4%. So with a minimum of a 5% contribution by the service member the government will match 5% for a total 10% contribution (more can be contributed by the service member). If the service member never puts anything towards it he or she will still receive a 1% allocation from the government. This huge because most members of the military don’t stay in long enough (typically 20 years) to receive their pension. Now no matter how much time you serve you at least walk away with something.
Types of funds:
• G Funds (Government securities)
• F Funds (Government, corporate, and mortgage backed bonds)
• C Funds (Stocks in large and medium sized companies)
• S Funds (Stocks in small to medium sized companies)
• I Funds (International stocks)
• L Funds (Lifecycle funds with target maturity horizons)
What I wish I knew when I started:
• Unless you log in to your TSP account online and manually allocate the funds your money is automatically invested in G Funds.
• G Funds have the lowest rate of return to date than any other fund.
• C Funds and S Funds are up 300% and 400% respectively since I joined. You guessed it, my money was tied up in G Funds for years and I missed most of this opportunity.
Upon exiting the military, and federal service, you have three options for your TSP account. You can cash out and pay the taxes and fees of withdrawing early. Roll it over to an IRA. Or you can let is sit and grow. Any of those options are perfectly viable depending on your goals. I may end up working as a federal employee when I retire from the Marine Corps. Letting the money sit in my TSP account may be my best option as I will be able to make contributions to it again.
Finally, I have taken a loan out twice against my TSP account. The first time I was young and dumb and needed to repair an inboard boat engine or risk scrapping the entire boat. I did get my money back when I eventually sold it but I lost potential earnings. The other time was when I bought my house. I’m very happy about taking the loan for my house as it paid off some debt, ensured my credit rating was very high, and covered all my closing costs. Now I have a condo in San Diego that has appreciated almost $100k and I have a very low interest rate and my TSP loan has been repaid.
*For all my military readers I suggest going to your base’s Certified Financial Counselor or Certified Financial Planner and asking them any questions you may have about TSP, investing, or paying down debt in general.*