![]() ![]() The TSP statements – showing your account’s contributions (from you) and growth – will identify if your TAP is a Roth IRA or not. Remember that these plans are subject to the same tax incentives and restrictions as normal IRAs. This is permitted under section 401(k) of the applicable law, which is why such retirement IRAs are called 401(k) plans. Normally this is done through matching – whatever you (the employee) contribute, your employer will match a portion of it, or up to a certain percentage of the employee’s income. What they came up with was the IRA, sweetened with tax incentives that encourage employers to contribute to their employees’ account. The decline of pension plans in the 1980s and 1990s caused employers and the government to seek new ways of providing retirement plans. In a Roth IRA, your contributions are not tax-exempt, but your withdrawals later in life are tax-free. A different “flavor” of IRA is called a Roth IRA. The catch is that all future withdrawals from your traditional IRA (including any TSP withdrawals) will be taxed as income. Normally you can’t withdraw from it until you are over the age of 59½, but in exchange you get to contribute money from your paycheck before it’s taxed, lowering your taxable income (and therefore, your taxes). So, the Thrift Saving Plan is basically a free IRA for service members!Īn IRA is a retirement account incentivized by special tax laws. The TSP military retirement plan is a good deal, because the federal government pays the administrative costs of the plan, so your money is never subject to fees for trading, account transfers, or anything else. ![]() The Federal Thrift Saving Plan (TSP) is a special type of Individual Retirement Account (IRA) maintained by the federal government and offered to the military and other federal employees.Īlong with their 20-year pension plan, military service members can use the TSP as an alternate or supplemental retirement plan. You’re considering all your military retirement options, but, do you know how much you’ve even saved for retirement? Are you aware of your TSP rollover options, and whether you should move to an employer 401(k) plan, IRA, or cash your TSP out? Do you even understand what all these acronyms and numbers mean?ĭon't’ worry! We’ve put together some actionable TSP retirement advice to answer all your questions about thrift savings plan withdrawal, and how to decide whether to cash it out or not. But since it’s always been that way, you probably haven’t thought much about your TSP since setting it up. If you have a Federal Thrift Savings Plan (TSP), you probably signed up for it at the start of your military career, and know that a percentage of your monthly income contributes to your TSP retirement plan. Marine Corps photo by Sgt Bobby Yarbrough) (This image was manipulated using filters.) ![]()
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