With the Thrift Savings Plan (TSP), you nay have signed up to have a percentage of your military pay deposited directly into your TSP. Troops can generally contribute up to $16,500 of their military pay to the Thrift Savings Plan.
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Thrift Savings: Don't Leave the Military Without It

As young military, you no doubt found out that the easiest way to invest was to participate in the Thrift Savings Plan.

With the Thrift Savings Plan (TSP), you nay have signed up to have a percentage of your military pay deposited directly into your TSP. Troops can generally contribute up to $16,500 of their military pay to the Thrift Savings Plan or you can contribute 100% of your tax-exempt combat zone pay, as long as total contributions for the year don't exceed $49,000. The minimum contribution is just 1% of your basic pay, for each pay period.

Maybe you chose the popular TSP investment choice, the L Fund. Lifecycle funds - sometimes called target-date funds - invest in a portfolio based on an investing time frame. You start out with more money invested in stock funds, then gradually become more conservative as your goals get closer. The lifecycle fund automatically adjusts the investments every quarter, so you don't need to make any changes yourself.

Now, your goals have been achieved and you're separating from the military. After years of building your savings, you don't have leave your Thrift Savings Plan behind! Consider making choices that continue to make the most of your Thrift Savings Plan (TSP) after military separation.


It makes sense to pay off any outstanding Thrift Savings Plan loans before you leave the military. The Internal Revenue Service considers the amount of an unpaid loan balance to be taxable income when you separate. Complete a Loan Payment Coupon (available at the TSP website) and send it with your payment to the TSP. Once you've addressed any outstanding loans, you can consider what you want to do with your Thrift Savings Plan. Remember that a 10% early withdrawal penalty tax may apply if you separate before the year you reach age 55.


After you leave the military, you can still choose to leave your Thrift Savings Plan account intact, if your account balance is $200 or more. If you have another eligible employer plan or a traditional IRA, you can transfer it into your TSP account and continue to enjoy the TSP's low administrative expenses and still change your investment mix with interfund transfers. If you leave your account with the TSP, you won't have to start withdrawing your money until you turn 70.


After your military career, you may work for an employer who offers a 401(k) or similar retirement plan. Or you may decide to open an IRA. You can transfer all or part of your Thrift Savings Plan to your new corporate savings plan. Before you do so, check if your new plan's expenses are higher than those of your Thrift Savings Plan: every dollar spent to manage your account is a dollar less saved towards your military retirement.


If you are ready to start withdrawing from your Thrift Savings Plan, you have many options. You can take a partial withdrawal if you are eligible. Refer to Form TSP-U-77, Request for Partial Withdrawal When Separated, for more details. You can choose one of the full withdrawal options:

  • Single payment

  • Monthly payments of a fixed amount

  • Life annuity

  • Any combination of the above
Be aware that along with Thrift Savings Plan withdrawals come taxes including a mandatory 20 percent Federal tax withholding. However, if all of your TSP contributions were tax-exempt, you will only owe taxes on the accumulated earnings. In certain circumstances, you may also be subject to a 10 percent early withdrawal penalty. Make sure your Thrift Savings Plan has your current address listed at all times.

Talk with your service transition assistance coordinator regarding Thrift Savings Plan options; read the booklet Withdrawing Your TSP Account After Leaving Federal Service; familiarize yourself with Important Tax Information About Payments from Your TSP Account. And call the ThriftLine at 1-877-968-3778 to talk to someone who can answer all your questions and help you make the right choices for a thrifty and profitable plan for your TSP after separation from the military.


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