Military Banking

MILITARY BANK BENEFITS
Smart Savings, Military Style

The economic downturn hasn't hit most military families quite as hard as civilians, largely because active military have secure full-time jobs, commissary and exchange privileges, free medical care and military housing benefits.

But military families aren't immune to the economy; and your military finances may be feeling the pinch.

As military servicemembers, you have many money-saving advantages that consumers don't have, and that helps when it comes to maneuvering successfully in this tighter economy. You should be taking full advantage of military savings plans and military loans that can help you make smart saving, spending and investing choices.

MILITARY SAVINGS DEPOSIT PROGRAM

Consider the Military Savings Deposit Program which allows military deployed to combat zones to have money automatically taken from each paycheck and placed into a savings account. The Military Savings Deposit Program earns servicemembers 10 percent on savings balances, for up to three full months after their deployment ends - that's a significantly higher interest rate than what banks offer consumers.

THRIFT SAVINGS PLAN

On October 30, 2000, the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001 (Public Law 106-398) was signed into law, with a provision that extended the Thrift Savings Plan, originally designed for Federal civilian employees only, to members of the uniformed services. Thus was the start of a whole new way to expand your retirement savings with contributions from your military pay.

The Thrift Savings Plan (TSP), a Federal Government-sponsored retirement savings and investment plan, was first established in the Federal Employees' Retirement System Act of 1986. Today, the benefits of TSP are available to both military and civilian employees.

TSP lets you make voluntary contributions to your military retirement rather than spending any extra earned money, such as pay received from your combat deployments, on the latest gadgets and non-necessities. Sure, you need a car; but there's no need to have a new Hummer when you could be investing that money in a high-interest military retirement savings plan like TSP.

The Thrift Savings Plan differs from the uniformed services retirement system.

The uniformed services retirement system is a defined benefit program; your retired pay is based on your years of military service and the rank held at the time of retirement, rather than on the amount of your contributions and earnings, which is what the Thrift Savings Plan offers. You may choose to put more or less of your military pay into your Thrift Savings Plan, keeping pace as your military career and military pay scale progresses.

The beauty of the Thrift Savings Plan is that it offers the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. And that's good news for securing your military retirement.

To participate in the TSP, you must sign up with your service. You contribute to the TSP from your own military pay; the amount you contribute and the earnings attributable to your contributions belong to you. They are yours to keep even if you do not serve the 20 or more years ordinarily necessary to receive uniformed services retired pay.

When it comes to making contributions to your Thrift Savings Plan, the sky's the limit: you can contribute any percentage (1 to 100) of your basic military pay. However, your annual dollar total cannot exceed the Internal Revenue Code limit, which varies each year. If you contribute to the TSP from your basic military pay, you may also contribute from any percentage of any incentive pay or special pay (including bonus pay) you receive, up to the limits established by the Internal Revenue Code.