[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]There are many ways for enlisted people to maximize the benefits of the military’s new retirement system, the most important of which is to make sure you are eligible to have your contributions to the Thrift Savings Plan matched by contributing enough of your paycheck before you retire. The longer you’re enlisted and the more you put away, the higher that retirement account will grow.
For those who have enlisted in 2018 and beyond, you will be subject to the updated blended retirement system, possibly making you the recipient of a smaller pension over the retirement system in place before it. The pension you will now receive each year is as follows: 20 years on would be 40 percent of your base pay, and for 30 years on, you’d get 60 percent. The trade-off is that now you’ll be getting extra money set aside in your Thrift Savings Plan, which advantageous and only available to government employees and military members.
The Department of Defense is the one who would match your contributions under the new blended retirement system. This is in addition to the money in your TSP. 2 months of service is all it takes before the department contributes 1 percent of your base pay into the TSP, and after that, you’ll get 4 percent matching contributions for up to 26 more years of service. And as long as you’re enlistment is longer than two years, you can keep all of this money stashed safely away in your TSP.
To maximize your TSP and blended retirement system matching contributions, a few extra steps should be taken. To get the biggest match back from the Department of Defense you should be putting into the TSP 5 percent of your pay. Compounding your savings can happen quickly as long as your contributing the department minimum, but keep in mind, the more you put in, the more you get back.
The new blended retirement system was instituted after the government found out that the number of service members staying enlisted long enough to receive a pension was less than 20 percent. Service people can get up to half of their base pay in their pension if they stayed in the military for 20 years, under the old retirement system, and up the three-fourths of their base pay if they were enlisted for 30 years. Leaving before the 20-year mark negates any retirement pay though. If you joined the military before 2006 or decided not to use the new blended retirement system, you’ll still be covered under the old plan. Keep in mind, the Department of Defense will not have your TSP contributions matched if you stay with the traditional retirement system, BUT, you still get the tax benefits and get to, and the money kept in the TSP no matter when you choose to leave the service. Note though that if you withdraw before the age of 59 and a half, you will incur a 10 percent penalty.
In 2019, you can contribute up to $19,000 dollar to the TSP regardless on if you with the old or new retirement system. Even more, if you’re over 50, for a maximum of $25,000 dollars. And even more than that – up to $56,000 dollars – if you are receiving tax-exempt pay while deployed in a combat zone. Those military members that are deployed can also get back a yearly interest of 10 percent and put up to $10,000 in your Savings Deposit Program.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”36272″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]
