With the current state of the economy, savings for retirement and for a rainy day is even more important. The military has its own individual savings program called the Thrift Savings plan, and it is for military personnel that wish to save a portion of their pay and benefits for the future. It is a tax deferred plan that a member contributes to that is similar in some ways to 401 (k) type plans. This thrift savings program was established in 1986 and set up to be a military and federal sector savings plan.
The Thrift savings plan is voluntary, you are allowed to set aside any percentage of your basic pay that you choose, up to the limits that the IRS sets every year. For the fiscal year 2007 for example you can set aside $15,500 dollars to be set aside out of your basic pay. It is a federally sponsored savings plan designed to encourage federal and military employees to save for their retirement. Working in the military you have an opportunity to gain in job skills and to learn things you can apply in the civilian field, but one of the benefits to military enlistment is the Thrift Savings plan. It is in many ways similar to private retirement plans, but for federal employees and military Servicemembers. This money is then put into your TSP account, and you do not have to pay taxes on it until you take it out when you retire. The TSP allows you to designate beneficiaries for your account balance, you can designate where you want the money to go should you pass away suddenly. If you experience financial hardship or difficult times, there are certain situations where you can borrow from your TSP benefit plan as long as you arrange to pay the money back. The thrift savings plan is a defined contribution plan. The income that you eventually receive will be decided upon how much money that you and the agency or service that you are in sets aside in your account, and the earnings on those contributions. There are some advantages to having a TSP account while you are on active duty service in the military. You can accelerate your savings if you are over age 50 in what is called catch up contributions. If you are younger than age 50 you still have a lot of options to save, and more years in which to save.
The Thrifts Savings Plan offers immediate tax deferred investment type earnings, and before tax savings. It is a wise investment plan for most members of the military who wish to set aside some of their earnings for retirement.