Thrift Savings Plan: Invest in Your Retirement

After years of proud service to our country, the last thing military retirees deserve is to spend their golden years living check to check.

Even with a 401(k) plan, it can take years of planning and saving to maintain a comfortable lifestyle. While a career in the military does not grant a 401(k) retirement package, service members do have the option to enroll in the Thrift Savings Plan (TSP).

The TSP is an important financial vehicle that can shape how service members and their families will spend retirement.

What is the Thrift Savings Plan?

The TSP, for military members and military personnel, is a government-sponsored retirement plan.

The TSP is considered a defined contribution plan and a tax deferred retirement plan. Upon enrollment, each service member has the option to invest in one or more predetermined funds, each with varying levels of return.

Choosing the best fund to meet your future needs in important. For military members, the TSP offers five simple index funds and a Lifecycle Fund (targeted retirement date fund).

Fund Overview

While the investment practice of each fund differs, there are only three basic investment categories: stocks, bonds, or a mixture of both.

Here is a brief explanation of each fund:

G Fund: Government Securities Investment Fund

• An exclusive investment in short-term U.S. Treasury security that has been specially issued to the TSP
• Earnings for the G Fund are entirely interest based

F Fund: Fixed Income Index Investment Fund

• By investing in the bond market, the objective of the F Fund is to match the performance of the Barclays Capital U.S. Aggregate Bond Index, which is a broad representation of the U.S. bond market
• Earnings consist of interest income and on the security’s gains (or losses) in the value of security

C Fund: Common Stock Index Investment Fund

• Invests in a stock index that fully replicates the Standard and Poor’s 500 (S&P 500) Index
• Earnings consist of dividend income and gains (or losses) in the stock price

S Fund: Small Cap Stock Index Investment Fund

• Investments are made in the stock index fund that tracks the Dow Jones U.S. Completion Total Stock Market Index
• Earnings consist of dividend income and gains (or losses) in the stock price

I Fund: International Stock Index Investment Fund

• The investment objective of the I Fund is to match the performance of the Morgan Stanley Capital International EAFE (Europe, Australia, Far East) Index
• Earnings consist of dividend income, gains (or losses) in the price of stocks and change in the value of currencies

Deciding which fund is right for you may be difficult, but the TSP has one last alternative: The Lifecycle Fund.

Using a professionally determined investment combination of each fund, the Lifecycle Fund tailors investment objectives based on various time horizons. The objective is to reach an optimal balance to maximize your investment.

How to Enroll in the Thrift Savings Plan?

Service members who wish to enroll in the TSP must first designate the percentage of their pay to invest. This is done through the automatic system for each branch of military.

Most branches of the armed forces use the system MyPay, but if this is not an option, you can complete Form TSP-U-1. Military members can learn more about the Thrift Savings Fund at www.tsp.gov.

Remember, it is often a good idea to seek the advice and input of a trained investment professional when making large financial decisions.