The Thrift Savings Plan (TSP) is one of those military benefits that everyone knows about but not everyone takes advantage of as they should. In this episode of Military to Millionaire, former Marine David Pere breaks down the TSP and explains why it's important
Invest five percent of your military wages into your Thrift Savings Plan (TSP). The government automatically matches one percent of your TSP but will match up to five percent. Simply contributing five percent, yourself, you’re getting a five percent pay raise from the government. The earlier you start doing this, the better.
On the Roth IRA side of the TSP world, you pay the taxes upfront. You pay the taxes on the traditional IRA side when you pull your money out. Service members are generally better off going the Roth route because you’re most likely in a lower tax bracket early on than you are later. Being in a lower tax bracket means paying fewer taxes and saving money in the long run.
If you don’t want to put a lot of research into how to invest your money, choose a lifecycle fund that ends when you retire and plan to start taking out your money. This works by automatically selecting more risky investments early on. Then as you get closer to retirement, your investments become less risky. You can earn more outside of life cycle funds, but it involves researching and knowing what you’re doing.
Want to learn more about Pere? Check out the Military to Millionaire website, and connect with him on Instagram or Facebook. Subscribe to his YouTube channel here! Take a look at David's book – The No B.S. Guide to Military Life here.
Looking for more ways you can be financially strong? Check out what's new on our Mighty Money page.