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Start
Saving for Retirement Now, Enroll in TSP
Current
economic forecasts are uncertain and the markets are
unpredictable. But there's one thing you can be sure of:
you will retire one day. So it's important that you
have a well-thought-out financial plan in place when that day
arrives. Retirement savings is a key component of every
comprehensive financial plan and that's where the Thrift Savings Plan
(TSP) comes in.
If
you serve a full 20 years in the military, you are eligible to receive
military retirement pay. Whether that income will be enough in
your retirement years depends on your personal needs and
lifestyle. Why not consider the TSP as a supplement to that
income? And what if you don't serve 20 years? In that case,
you definitely need a way to save for retirement. The TSP can
help.
It's
easy to contribute to the TSP because your contributions come out of
your pay and are made before your taxes are calculated so less of your
gross pay is withheld for the IRS. The money you contribute to
your TSP account and the earnings that it accumulates grow on a
tax-deferred basis. You don't pay tax on your earnings (and
contributions) until you withdraw your money. And you are not
required to start withdrawing your money until you are age 70½.
In
addition, military members serving in a combat zone are eligible to
contribute tax-exempt pay. Those contributions will never get
taxed. When you begin taking withdrawals, only the accumulated earnings
on those tax-exempt contributions are taxed.
The
TSP is simple to understand because it offers a range of solid
investment options without confounding you with an endless or overlapping
list of choices. You can make investment decisions based on how
much risk you are willing to take and how much time you have until you
begin to withdraw your money.
Also,
TSP's administrative expenses are very low-and that means there's more
money working for you in your account. In fact, you won't find
another retirement plan or mutual fund with lower expenses.
Why
wait? All you have to do to start contributing to the TSP is fill
out the Thrift Savings Plan Election Form, TSP-U-1 (http://www.tsp.gov/uniserv/forms/tsp-u-1.pdf)
or you can sign up through your service's electronic payroll system
(https://mypay.dfas.mil). To find out more, go to www.tsp.gov.
Next
month: How much of my money can I put into the TSP?
Nearly Half
of U.S. Servicemembers Confident About Retirement, 22 Percent Unaware
of Thrift Savings Plan, New FINRA Foundation Survey Shows
Washington,
DC
- While nearly half of U.S. servicemembers are confident about their
ability to retire comfortably, 22 percent are unaware of the Thrift
Savings Plan (TSP) - the federal government's equivalent of a 401(k)
plan - according to a new survey funded by the Financial Industry
Regulatory Authority (FINRA) Investor Education Foundation.
The Military Financial Confidence Survey
(MFCS) - conducted by the FINRA Foundation in cooperation with the
Employee Benefit Research Institute® (EBRI) and
Mathew Greenwald & Associates - shows that 47 percent of
servicemembers report feeling either very confident or somewhat
confident about their ability to retire comfortably.
"This survey highlights the incredible
importance of giving our men and women in uniform the educational tools
they need to prepare for their retirements," said John Gannon,
President of the FINRA Foundation. "The fact that over one-in-five
servicemembers are unaware of the TSP, the retirement savings vehicle
available to every servicemember, underscores the need to help them
take advantage of every opportunity to save for a comfortable
retirement."
While 25 percent of servicemembers say that
saving for retirement is their most pressing financial issue, the MFCS
found that immediate financial problems were of far greater concern to
servicemembers, with 29 percent saying paying down debt and 18 percent
saying making ends meet was their most pressing financial issue.
The MFCS results also show that servicemembers
are more realistic than civilians about the amount of money they will
need to retire comfortably. According to a 2008 EBRI survey, 26 percent
of civilian workers believe they will need less than $250,000 for
retirement, while only 10 percent of servicemembers believe that this
would be a sufficient amount. Nearly one-third of servicemembers (32
percent) believe they will need to save $1 million or more, compared to
only 18 percent of the civilian workforce. Strikingly, even junior
enlisted servicemembers (E-1 to E-6) were far less likely to believe
that $250,000 is a sufficient amount needed for retirement, with only 9
percent of these servicemembers reporting that $250,000 was sufficient.
Overall, servicemembers are significantly better
positioned to determine their retirement savings needs than their
civilian counterparts. Servicemembers are considerably less likely than
civilian workers to rely on guessing to determine their retirement
savings needs (33 percent vs. 47 percent for civilians).
Financial preparedness was especially evident
among military officers, who are less than half as likely to rely on
guessing to determine their savings needs (18 percent vs. 47 percent
for civilians), nearly twice as likely to ask an independent financial
professional (32 percent vs. 17 percent for civilians), four times more
likely to have filled out a retirement-needs worksheet or form (21
percent vs. 5 percent for civilians) and nearly six-times more likely
to have used an online calculator (40 percent vs. 7 percent for
civilians). Enlisted personnel are also more likely to use an online
calculator or fill out a worksheet or form than civilian workers.
The FINRA Foundation's MFCS suggests that doing a
retirement needs calculation may lead to having a more realistic savings
goal, since the amount of retirement savings believed necessary was
higher among those who had performed a retirement savings calculation
than among those who had not.
Servicemembers are also less likely to subscribe
to attitudes that may falsely increase retirement confidence. For
example, civilians are nearly twice as likely (45 percent) as
servicemembers (25 percent) to strongly agree that they can rely on
lifestyle cuts in retirement to make up for a shortfall in savings.
Additionally, only 28 percent of servicemembers agree that they may not
live long enough to use all of their retirement savings, compared to 44
percent of civilian workers.
The TSP was the leading savings vehicle used by
servicemembers saving for retirement, with 68 percent of such
servicemembers reporting contributing to the TSP. The likelihood of
contributing to the TSP was steady across demographic groups, including
rank. The MFCS also highlighted the importance of financial education.
One-quarter of servicemembers (26 percent) reported that a briefing
given by military financial educators encouraged them to participate in
the TSP.
The Foundation's MCFS also revealed that 60
percent of servicemembers intended to stay in the military for 20 years
or more. Servicemembers are eligible for retirement pay after 20 years
of service. Perhaps as a result, servicemembers were 5 times more
likely than civilians to say they planned to retire before age 55 (20
percent for military vs. 4 percent for civilians). Civilian workers
were nearly four times more likely to say they intended to retire at
age 70 or older (19 percent civilian vs. 5 percent military).
Finally, while servicemembers and civilians were
equally likely to report having saved money for retirement, service
members were more likely to have non-retirement savings (61 percent
military vs. 52 percent civilian).
Military
Saves was made possible in part through the generous support of the
FINRA Investor Education Foundation. Please visit www.SaveAndInvest.org.
Military
Saves is also supported by Wells Fargo Bank, Chase Bank, USAA
and Dave Ramsey's Financial Peace University Military Edition.
Together, we can build wealth, not debt.
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