How to Maximize Retirement Savings

How to Maximize Retirement Savings

If someone offered you free money, would you take it? Of course you would!

If your service member has a Thrift Savings Plan account or you have a 401(k) plan through your employer, you may qualify for “matching contributions” — money that the government or your employer kicks in when you contribute to your retirement account. Taking advantage of matching contributions can maximize your retirement savings. Here’s how it works:

 

Thrift Savings Plan

If your spouse is covered by the Blended Retirement System (BRS), they are automatically enrolled in the Thrift Savings Plan (TSP) and can have money deducted from their pay and deposited into the account. This money can be invested in a variety of funds. Service members enrolled in the Legacy Retirement System have the same access to the TSP, but do not receive the matching benefit explained below.

After service members have been in the military for 60 days under the BRS, the service branch automatically contributes 1% of their basic pay to their TSP each month. For example, if your spouse earns $2,042 per month, the service branch automatically contributes $20.42 to their TSP regardless of whether the service member contributes to the account.

Beginning the 25th month of service, the real impact starts. The service branch continues to contribute 1%, and then matches your service member’s eligible deposits up to an additional 4%. So, if your service member’s basic pay is $2,042 per month and they contribute 5% ($102.10) to the TSP, the service branch contributes 1% ($20.42) and matching contribution of 4% ($81.68). Therefore, while your spouse contributes $102.10, they receive another $102.10 in automatic and matching contributions. Pretty great, right?

Over time, these matches can really add up. See the table below for more contribution scenarios.

 

 

401(k)s

Similar to the Thrift Savings Plan, many companies offer 401(k) plans as an employee benefit. You can automatically contribute money from each paycheck and invest into a variety of options.

Many employers encourage you to use their 401(k) by offering matching contributions, up to a certain percentage of your pay. For example, if your salary is $2,000 per month, and you deposit 5% ($100) into your 401(k) account, your employer may match it with another 5% ($100), giving you a total monthly investment of $200. If you do that for a year, you will deposit $1,200 and you will receive another $1,200 from your employer. Every plan is different so find out how matching works with your employer to take advantage of those extra contributions.

 

The Bottom Line

When you combine your contributions with employer matching funds and add the power of compound interest, you’ll see a boost to your retirement savings! Learn more about saving for your future with the helpful resources below or by consulting a free personal financial manager or counselor at your nearest Military and Family Support Center.

Resources

 

Bonus Information

TSP: A few things to keep in mind

  • Service member contributions are always theirs to keep when they leave the military, but beginning the 25th month of service, the matching contributions in the TSP are fully “vested” — that is, they are available when the service member leaves the military.
  • Matching contributions in the TSP are only one part of the Blended Retirement System. Service members can also qualify for a pension and Continuation Pay. Visit this webpage to learn more.
  • Service members can change their contribution amount through mypay.dfas.mil.
  • To learn more about the Thrift Savings Plan, visit tsp.gov.

TSP and 401(k): A few other points

  • The maximum contribution to these types of retirement accounts typically update annually so it’s important to check each year. For 2024, the amount will be $23,000.
  • Contributions are deducted from your pay before that money is taxed. Traditional TSPs and 401(k)s can offer tax advantages by reducing taxable income. For example, if the service member contributes $1,200 to the TSP in one year, your taxable income goes down by $1,200. Also, your money grows tax-deferred until you withdraw it, and eligibility typically starts at age 59 ½.
  • Roth TSP and 401(k)s can offer tax advantages in the future. The money contributed now is taxed but can be withdrawn tax-free — usually starting at age 59 ½.
  • When you leave a job, your 401(k) can come with you and be “rolled over” into another company’s 401(k) or into an Individual Retirement Account (IRA).

Keep in mind that not all 401(k) plans have matching, and even if they do, matching might be done in different ways, so check with your employer to see what’s available to you.

 

Mandi Moynihan is a CERTIFIED FINANCIAL PLANNER™ professional who has been with MilSpouse Money Mission since its inception. She also served in the Army and is the spouse of a retired service member.

 

MilSpouse Money Mission® is a Department of Defense resource that offers FREE personal financial education specifically geared toward military spouses. There is a Money Ready guide for various stages of financial life, a MilLife Milestones section to help you through the big moments in your military journey, a blog, spouse videos, quizzes, calculators and more!

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses

MilLife Milestones

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses
Never Miss
an Update
Sign up for our eNewsletter
couple examines financial documents

Insurance and Estate Planning for Your Peace of Mind

By Mandi Moynihan | July 1, 2024

Insurance protection and estate planning are key to your family’s financial peace of mind. Insurance protects you from…

Read More

Personality Quiz

Personality Quiz

Next Blog

If someone offered you free money, would you take it? Of course you would!

If your service member has a Thrift Savings Plan account or you have a 401(k) plan through your employer, you may qualify for “matching contributions” — money that the government or your employer kicks in when you contribute to your retirement account. Taking advantage of matching contributions can maximize your retirement savings. Here’s how it works:

 

Thrift Savings Plan

If your spouse is covered by the Blended Retirement System (BRS), they are automatically enrolled in the Thrift Savings Plan (TSP) and can have money deducted from their pay and deposited into the account. This money can be invested in a variety of funds. Service members enrolled in the Legacy Retirement System have the same access to the TSP, but do not receive the matching benefit explained below.

After service members have been in the military for 60 days under the BRS, the service branch automatically contributes 1% of their basic pay to their TSP each month. For example, if your spouse earns $2,042 per month, the service branch automatically contributes $20.42 to their TSP regardless of whether the service member contributes to the account.

Beginning the 25th month of service, the real impact starts. The service branch continues to contribute 1%, and then matches your service member’s eligible deposits up to an additional 4%. So, if your service member’s basic pay is $2,042 per month and they contribute 5% ($102.10) to the TSP, the service branch contributes 1% ($20.42) and matching contribution of 4% ($81.68). Therefore, while your spouse contributes $102.10, they receive another $102.10 in automatic and matching contributions. Pretty great, right?

Over time, these matches can really add up. See the table below for more contribution scenarios.

 

 

401(k)s

Similar to the Thrift Savings Plan, many companies offer 401(k) plans as an employee benefit. You can automatically contribute money from each paycheck and invest into a variety of options.

Many employers encourage you to use their 401(k) by offering matching contributions, up to a certain percentage of your pay. For example, if your salary is $2,000 per month, and you deposit 5% ($100) into your 401(k) account, your employer may match it with another 5% ($100), giving you a total monthly investment of $200. If you do that for a year, you will deposit $1,200 and you will receive another $1,200 from your employer. Every plan is different so find out how matching works with your employer to take advantage of those extra contributions.

 

The Bottom Line

When you combine your contributions with employer matching funds and add the power of compound interest, you’ll see a boost to your retirement savings! Learn more about saving for your future with the helpful resources below or by consulting a free personal financial manager or counselor at your nearest Military and Family Support Center.

Resources

 

Bonus Information

TSP: A few things to keep in mind

  • Service member contributions are always theirs to keep when they leave the military, but beginning the 25th month of service, the matching contributions in the TSP are fully “vested” — that is, they are available when the service member leaves the military.
  • Matching contributions in the TSP are only one part of the Blended Retirement System. Service members can also qualify for a pension and Continuation Pay. Visit this webpage to learn more.
  • Service members can change their contribution amount through mypay.dfas.mil.
  • To learn more about the Thrift Savings Plan, visit tsp.gov.

TSP and 401(k): A few other points

  • The maximum contribution to these types of retirement accounts typically update annually so it’s important to check each year. For 2024, the amount will be $23,000.
  • Contributions are deducted from your pay before that money is taxed. Traditional TSPs and 401(k)s can offer tax advantages by reducing taxable income. For example, if the service member contributes $1,200 to the TSP in one year, your taxable income goes down by $1,200. Also, your money grows tax-deferred until you withdraw it, and eligibility typically starts at age 59 ½.
  • Roth TSP and 401(k)s can offer tax advantages in the future. The money contributed now is taxed but can be withdrawn tax-free — usually starting at age 59 ½.
  • When you leave a job, your 401(k) can come with you and be “rolled over” into another company’s 401(k) or into an Individual Retirement Account (IRA).

Keep in mind that not all 401(k) plans have matching, and even if they do, matching might be done in different ways, so check with your employer to see what’s available to you.

 

Mandi Moynihan is a CERTIFIED FINANCIAL PLANNER™ professional who has been with MilSpouse Money Mission since its inception. She also served in the Army and is the spouse of a retired service member.

 

MilSpouse Money Mission® is a Department of Defense resource that offers FREE personal financial education specifically geared toward military spouses. There is a Money Ready guide for various stages of financial life, a MilLife Milestones section to help you through the big moments in your military journey, a blog, spouse videos, quizzes, calculators and more!

Leave a Comment


*

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses

MilLife Milestones

Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses
Strengthen Family Finances

4 Ways Military Spouses Strengthen the Family Finances

By Team Member | April 17, 2019

Whether you’re a military family, civilian family, or even the royal family, having a second income is likely…

Read More

Personality Quiz

Personality Quiz
Primary Text Separator for Milspouse Money Mission, Financial Education for Military Spouses

Next Blog