The new year is a busy time, but it’s also a good time to set aside a little to review your financial situation and make plans for 2026. As part of those plans, early January is a great time to increase your contributions to the military’s Thrift Savings Plan (TSP).
Related: Everything there is to know about military pay and veteran benefits for 2026
TSP Basics
TSP is a tax-advantaged retirement savings account, similar to a civilian 401(k). Contributions are made directly from your military pay account. You can elect to have your contributions placed in either a Traditional TSP or a Roth TSP account, or split your contributions between the two.
Traditional TSP account contributions are “pre-tax,” meaning that you won’t pay income taxes on that money in the year that you earn it. However, you’ll pay income taxes on the contributions and the growth when you take the money out. While this can lower your tax liability now, many military members already pay very low or no income taxes. If that’s the case, you’ll likely be paying more taxes later in life when you start using your TSP money.
Roth TSP accounts are “post-tax,” meaning that you pay income taxes on the money in the year that you earn it. It grows over time, tax-free, and there are no taxes on distributions provided you follow the distribution rules. Generally, this means that you are at least 59½ years old when you take the money out, but there are exceptions.
TSP and the Blended Retirement System
The military has two active retirement systems: the Legacy System and the Blended Retirement System (BRS). You are in the BRS if you entered the military on or after January 1, 2018, or if you served before that date and opted to move from the Legacy System to the BRS.
One key feature of BRS is that every service member has a TSP account. The government starts making automatic contributions of 1% of the service member’s base pay after 60 days of service. In addition, after two years of service, the service member is automatically enrolled to contribute 5% of their base pay into TSP, with the government contributing 4% to “match” the service member’s contribution. Service members may change that contribution level at any time.
Why to Increase Your Contributions at Year’s End
TSP is a significant part of the military’s retirement system. If you serve less than 20 years, TSP is the only retirement money you’ll take from your military service unless you are medically retired or retire under a Temporary Early Retirement Authority (TERA). If you serve long enough to earn military retirement pay, TSP is another valuable leg in your overall retirement plan.
Therefore, it helps you to figure out ways to contribute more than 5% to TSP. Federal law has an annual cap on qualified retirement plan contributions, but they’re relatively high compared to military pay. The limit for 2026 is $24,500 per year—that’s $2041.67 per month! Most of us can’t contribute quite that much, but we can work in that direction by making regular increases to our contribution level.
The change of the year is an easy time to increase your contributions without having a smaller paycheck, because the annual pay increase will offset your increased contributions.
For example, let’s say you are an E-4 with over four years of service and you contributed 5% to your TSP account in 2025. Your base pay in 2025 was $3,204 per month, and so your 5% contribution was $160 per month.
Then, let’s imagine that you increase your TSP contributions to 6% for 2026. The 2026 pay for an E-4 over four years of service is $3,482—an increase of $278 per month. A 6% TSP contribution will be $209 per month, which is $49 more than the current $160. But you’ll still bring home more pay, since that extra $49 is taken out of your $278 pay increase (this assumes nothing else changes, like a move to a new BAH rate or a tax change).
If you never make another change to your contributions, that extra $49 per month will mean an additional $8,000 in your account in ten years, assuming a conservative 6% growth in your account. If you let that money remain in your account until retirement age, you could have an extra $40,000 or $50,000 in your account, depending on how old you are now and what age you retire.
Now let’s imagine that you make that same 1% increase with every pay raise, whether that’s a promotion, a time-in-service increase, or an annual pay chart update. Within a few years, you could be contributing 15% of your base pay to TSP without ever having your paycheck get smaller. It’s like magic!
Timing Matters When You Make Changes
December end-of-month paychecks have already been calculated, so changes made now should not impact your December 2025 pay deposit amount because they won’t take effect until the January pay period. In January, you have until around the 6th of the month to make a TSP change that will be reflected in your January mid-month paycheck.
If you make a change later in January, it will be effective in January, but the entire increase may be deducted from your end-of-month paycheck rather than being distributed between the two paychecks. There’s nothing wrong with that, but it may mean your paychecks aren’t even for a few checks until that gets settled. That’s why most people find the very end of December or the very beginning of January to be the perfect time to increase their TSP contributions.
