The Thrift Savings Plan
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The Thrift Savings plan (TSP) may be described as a retirement savings program meant for the armed forces members as well as civilians who are employees of the US Federal Government.
Nature of Plan
Along with the FERS Annuity and Social Aecurity, TSP is the third component of Federal Employees Reteirement System (FERS) and the program is tailored to include most of the salient features of private sector 401(k) plans. The TSP is managed by theFederal retirement Thrift Investment Board.
TSP consists of various investment funds – government security, common stock, small cap stock, international stock, fixed income and life-cycle funds where the concerned employees can choose to invest.
One major advantage of TSP is the contributions are tax-deferred and as such, the contributions will not be taxed till such time the money is withdrawn – and you can ideally postpone the withdrawal to any time after retirement.
TSP is also quite flexible like all other retirement plans as the employees can shift non-government related IRAs as well as 401(k) plans into TSP and vice versa when there are employment changes.
TSP and Armed Forces
To become eligible for matching contributions, members belonging to the uniformed services must consent to render active duty for minimum six years.
TSP also envisages military marriage separation pay whereby dependents of the members of armed forces receive money when their spouses are on military-related duties for duration in excess of 30 days. Spouses of military personnel will certainly need money to run the household while their husbands are away on military duties.
The right thing to do is chalk out a financial arrangement before the husband leaves his headquarters. This will ensure the wives can avail money whenever needed.
TSP and Civilian Employees
As regards civilian employees participating in TSP, only the FERS (Federal Employee Retirement System) employees are eligible to receive employer contributions. If you happen to be a FERS employee, the federal agency provides two different sorts of contributions in your TSP account. These contributions are not deducted from your salary. Besides, they also do not get added to your pay for income tax/social security purposes.
Quite a lot of TSP participants will be in need of legal help when they run into problems – for instance, if there are military marriage separations through divorce or if any similar complications arise. Attorneys must become familiar with the TSP rules and related issues to render legal assistance to their clients.