Many Servicemembers are aware of the advantage to planning their financial future and retirement. As a Servicemember, the advantages of using the Thrift Savings Plan are many, it is a tax deferred or tax exempt method of growing your savings for that day when you do retire. The Thrift Savings Plan was established by Congress as a 401(K) type retirement investment and savings plan, to closely approximate the type of retirement pensions many corporations provide for their employees.
The Thrift Savings Plan is not mandatory, it is an optional voluntary plan that a Servicemember can utilize to contribute a defined portion of your basic pay. If you contribute up to the allowed amount of basic pay, you then can contribute anywhere from one percent, up to one hundred percent of any special or incentive pay you receive.
Some soldiers are eligible for MOS job TSP Fund matching money. This is an incentive program for soldiers to encourage their savings, where the government will match up to a certain dollar amount any funds contributed by the Servicemember to their TSP account. You can allocate or contribute any amount of your base pay from one to one hundred percent. But you cannot exceed the limit that the IRS places on your contributions, which for the tax year 2006 was fifteen thousand dollars. In order to contribute any of your special or incentive pay you have to give first an amount from your base pay.
When you contribute to your TSP account the money is taken out before any taxes are removed, so it is a type of pre tax savings account. The money in your TSP account is tax deferred, you do not pay any taxes on the money until you take it out, usually at retirement. You are able to split up your TSP investment funds among five different government funds.
Rollover. In many cases if you have other retirement funds in other non-government accounts you are eligible to voluntarily transfer or roll over these funds to your TSP account. This is not mandatory, but is something you may consider if your TSP offers a higher rate of return. Matching. Each of the branches of service can have their Secretary (such as Secretary of the Army, Secretary of the Navy, etc) designate critical job titles. Servicemembers who serve in these jobs are then able to receive matching contributions for any money they contribute to their TSP. To be eligible for this they must agree to serve a six-year enlistment, and this is only available on the first five percent of contributions of base pay.