A recent article from Military Times dated October 7, 2022, highlighted a US Coast Guard member who hit the milestone in October 2021 of having $1 million in his Thrift Savings Plan (TSP) account.
In the article, “This Coast Guardsman became a millionaire with his Thrift Savings Plan (TSP)”, details shed light on how the servicemember used every opportunity to increase his investment in the TSP, a 401(k) retirement plan run by the federal government.
The article cited the Department of Defense’s (DoD) statistic that as of April 2022 there were roughly 1.1 million Blended Retirement System (BRS) servicemember participants in the TSP. In the BRS, servicemembers receive a federal government automatic contribution of 1% after being in service for 60 days. For servicemembers who elect to contribute a portion of their own pay, the service will match up to 4%, for a total of 5% matching. There are a number of servicemembers contributing at least 5% of their pay to receive the full DoD match. According to the article, as of April 2022, 78.7% of Active Duty troops and 70.9% of the Ready Reserve are getting the full match.
Since the BRS uses the basic pay multiplier of 2% — rather than 2.5% for the legacy system — for calculating retirement pay, this will mean reduced pensions for BRS servicemembers, with an increase on new and different savings and investment options for retirement. This underscores the importance of utilizing the TSP service match — that 5% is essentially free money! Additionally, servicemembers should educate themselves on the different fund options available in TSP and control the funds in which they are participating for even greater financial gains for retirement. TSP members have the option to designate their contribution as traditional (tax deferred) or Roth (taxed at the time of contribution but never taxed again, nor the earnings). Matching contributions will always be traditional.
Under the BRS, the servicemember is always vested in their own contributions in TSP. After two years in service, servicemembers are also vested in the service-matching contributions to TSP as well. Being vested means that money is portable and can go with the servicemember when they leave service.
Need resources or more information? The Office of Financial Readiness (FINRED) has great information for Federal Employees, including those of the DoD such as the BRS. And AAFMAA’s Member Benefits team can guide you in your learning. To read the full article about the Coast Guardsman who became a millionaire, visit Military Times.
This article was originally published March 23, 2017.