What's in the Thrift Savings Plan?

Story Number: NNS160514-02Release Date: 5/14/2016 3:07:00 PM
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By Mass Communication Specialist 3rd Class David A. Cox

SOUTH CHINA SEA (NNS) -- Sailors have many investment options when it comes to retirement; one of those is the Department of Defense's Thrift Savings Plan.

Chief Aviation Maintenance Administrationman Rhoda Rothwell, USS John C. Stennis' (CVN 74) lead command financial specialist, has spent the last year ensuring Sailors understand the various options for investing, including the Thrift Savings Plan (TSP).

"TSP is not like a regular savings plan where it's just sitting in an account with very little [return on investment]," said Rothwell. "You can keep track of where your money is going and how much return on investment it's accruing. It's a better way to get more for your money."

TSP is the equivalent of a civilian 401(k) retirement plan. Service members can contribute dollars from their paycheck before taxes are taken out. The service member then decides where to allocate the money based on six different mutual fund options.

The safest fund in the TSP is the G fund, which invests in government bonds. The S, I and C funds are riskier, because they invest in shares of stocks of publicly traded companies. Higher risk means that the funds have the potential for higher investment returns. The F fund is a mix of bonds and stocks, and the L fund invests in all of the funds previously mentioned. Which fund the service member decides to invest in depends on their own personal retirement goals.

"If you put it all into the G fund you won't be getting the most bang for your buck, but if allocated well to all the funds, you could be making a decent return on investment in a few years," said Rothwell. "Six percent each paycheck could very well turn into a million dollars by the age of retirement."

Rothwell said that the L fund is probably the best fund for a young Sailor just joining.

Investing in the TSP also has several other advantages including: being able to borrow against the amount available in your account for personal loans or home loans and being able to roll the amount over into a private 401(k) or individual retirement account (IRA).

If a service member decides to withdraw all of their TSP before the age of 59 1/2, the amount will be subject to a 20 percent federal income tax in addition to a 10 percent early withdrawal penalty. When an individual separates from the military they are allowed to keep their investment in TSP however they must withdraw the full amount or roll it into a different account by age 70 1/2.

Rothwell said Sailors should put money in the TSP, because it is an account you do not see every day, like your savings account.

"Your first thought when you look for money for an emergency isn't to take your money out of your TSP, it's to take it out your savings," said Rothwell. "A good quote by Warren Buffet is 'Do not save what is left after spending, but spend what is left after savings,' which is easy when you have a TSP, if you budget and finance correctly you won't have a problem," said Rothwell.

Providing a ready force supporting security and stability in the Indo-Asia-Pacific, John C. Stennis is operating as part of the Great Green Fleet on a regularly scheduled 7th Fleet deployment.

For more news on USS John C. Stennis (CVN 74) visit http://navy.mil/local/cvn74/ or www.facebook.com/stennis74.

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