The Thrift Savings Plan (TSP) is a Federal Government-sponsored retirement savings and investment plan. The National Defense Authorization Act for Fiscal Year 2001 extended participation in the TSP, which was originally only for Federal civilian employees, to members of the uniformed services, and members began enrolling on October 9, 2001. The TSP offers the same type of savings and tax benefits that many private corporations offer their employees under so-called "401(k)" plans. The retirement income that you receive from your TSP account will depend on how much you have contributed to your account during your working years and the earnings on those contributions.
But, it's important to remember the TSP is for long-term retirement savings. There are penalties for early withdrawals. So if you're looking short-term savings, consider U.S. Savings Bonds. They are a convenient way to help save for homes, education, automobiles, or vacations.
The TSP, administered by the Federal Retirement Thrift Investment Board, previously has been available only to federal civilian employees. The fiscal 2001 Floyd D. Spence National Defense Authorization Act extended TSP participation to active duty and reserve component members of the Army, Air Force, Marine Corps, Navy and Coast Guard, and uniformed members of the Public Health Service and the National Oceanic and Atmospheric Administration.
As a military member of the uniformed services, your account can be established using an automated system. For example, most members of the uniformed services use 'myPay.' The myPay link is provided below under 'Tools.'
Participants can invest a percentage their military base pay in a number of TSP funds with varying amount of risk and reward.
AS A MEMBER OF THE UNIFORMED SERVICES…
-You can also contribute from 1 to 100 percent of any incentive pay, special pay, or bonus pay — as long as you also elect to contribute from your basic pay
-You can elect to contribute from incentive pay, special pay, or bonus pay, even if you are not currently receiving them. These contributions will be deducted when you do receive any of these types of pay
-You cannot contribute from sources such as housing or subsistence allowances
-If you are receiving tax-exempt pay (i.e., pay that is subject to the combat zone tax exclusion), your contributions from that pay will also be tax-exempt. You may also contribute more of your pay to the TSP during the year
-Be aware that if you do contribute tax-exempt pay, your total contributions from all types of pay must not exceed the Internal Revenue Code (I.R.C.) section 415(c) annual addition limit for the year. This limit does not include catch-up contributions you may make during the year
-You cannot make catch-up contributions from tax-exempt pay, incentive pay, special pay, or bonus pay
Currently, members of the uniformed services do not receive Matching Contributions. However, the law that extended participation in the TSP to members of the uniformed services allows the secretary of each individual service to designate critical specialties as eligible for Matching Contributions under certain circumstances.