After years of proud service to our country, the last thing military retirees deserve is to spend their golden years living check to check.
Even with a 401(k) plan, it can take years of planning and saving to maintain a comfortable lifestyle. While a career in the military does not grant a 401(k) retirement package, service members do have the option to enroll in the Thrift Savings Plan (TSP).
The TSP is an important financial vehicle that can shape how service members and their families will spend retirement.
The TSP, for military members and military personnel, is a government-sponsored retirement plan.
The TSP is considered a defined contribution plan and a tax deferred retirement plan. Upon enrollment, each service member has the option to invest in one or more predetermined funds, each with varying levels of return.
Choosing the best fund to meet your future needs in important. For military members, the TSP offers five simple index funds and a Lifecycle Fund (targeted retirement date fund).
While the investment practice of each fund differs, there are only three basic investment categories: stocks, bonds, or a mixture of both.
Here is a brief explanation of each fund:
G Fund: Government Securities Investment Fund
F Fund: Fixed Income Index Investment Fund
C Fund: Common Stock Index Investment Fund
S Fund: Small Cap Stock Index Investment Fund
I Fund: International Stock Index Investment Fund
Deciding which fund is right for you may be difficult, but the TSP has one last alternative: The Lifecycle Fund.
Using a professionally determined investment combination of each fund, the Lifecycle Fund tailors investment objectives based on various time horizons. The objective is to reach an optimal balance to maximize your investment.
Service members who wish to enroll in the TSP must first designate the percentage of their pay to invest. This is done through the automatic system for each branch of military.
Remember, it is often a good idea to seek the advice and input of a trained investment professional when making large financial decisions.