The Lowdown on the Thrift Savings Plan


The Lowdown on the Thrift Savings Plan

The military's retirement-savings program is a great way to build a nest egg and can be rolled into an IRA.

What do you think about the military's Thrift Saving Plan (TSP) program? Is it worth the investment and can you roll it over to an IRA or ROTH IRA when a person retires from the military? Also, why doesn't your magazine ever talk about military retirement planning? Yes, our retirement system is different from the civilian sector, but we do have soldiers in the military who can retire from the service at the age of 38 if they enlisted at the age of 18 and completed 20 years of active service. I have talked to many of my comrades who are about to retire from the military at a young age of 38 to 48 but don't really know what to do with that retirement check. Can you address these issues in future magazine articles? Thanks for your support.

Thank you for sending your question to Kiplinger's. We hear from so many members of the military who would like us to write more articles about their unique retirement and financial-planning needs. I think that's a great idea. I'd love to write more military-focused articles to answer our readers' questions and because I personally know about these special issues as the wife of an Army doctor.

The thrift savings plan is a wonderful way to save for retirement. Like a 401(k), your contributions are taken out of your paycheck before taxes and the money grows tax-deferred through the years. The TSP includes several good low-fee investment choices -- including life-cycle funds, which have diversified portfolios that automatically become more conservative as your retirement date gets closer.

You can invest up to $15,500 in the thrift savings plan in 2008, and you can add all of your tax-exempt pay while serving in a combat zone. Total contributions can't exceed $46,000 in 2008. When you withdraw the money, you won't be taxed on contributions from tax-exempt pay. For more information, see the TSP Web site.


After you leave the service, you can roll the TSP money over into an IRA. You can get more information about the rollover rules from the TSP Web site.

It's a good idea, though, to invest in an IRA while you're contributing to a TSP, especially if you qualify for a Roth. You can invest up to $5,000 in an IRA in 2008, even if all of your income is tax-exempt pay from a combat zone.

See At Your Service for more information about thrift savings plan investing options and IRA rules for members of the military. Also see Assets Deployed, which goes into more detail about financial planning for members of the military.

I also wrote an article for the August issue of Kiplinger's Personal Finance magazine about financial scams targeting members of the military. I went into detail about TSPs and other savings options that are much better than some of the high-fee investments often targeted toward members of the military. Subscribers are receiving the issue now, and the article should appear on within the next week.

And we're working on an article about the new GI Bill for the 21st Century. If you have any questions about the new GI bill or would be interested in being included in the article, please e-mail me at

Got a question? Ask Kim at