Reservist

ISS4 2017

Reservist Magazine is the award-winning official publication of the United States Coast Guard Reserve. Quarterly issues include news and feature articles about the men and women who comprise America's premier national maritime safety and security

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Five things reservists need to know about TSP Through recent discussions with Coast Guard reservists, I realized that many are not participating in the Thrift Savings Plan (TSP), the primary tax advantage retirement savings vehicle for federal government workers and military members. Many reservists invest in retirement through private employer plans, but the TSP should also be considered. In training hundreds of service members over the past few years on TSP, I've developed five points for reservists to understand: • You can have two retirement plans. Investing in a 401(k) plan with your private employer and the TSP is allowable by the IRS, as long as your combined contributions for both accounts do not exceed the annual contribution limits ($18,000 limit for 2017, plus $6,000 "catch-up" contribution for those 50 and over). • Know which funds you're in. Once you establish your TSP account, all contributions are invested in the ultra-conservative Government Securities Investment Fund (commonly known as the G Fund) . This is the default fund; unfortunately, most members unknowingly keep all of their money in this ultra- conservative, very slow-growing G Fund. There are other options available. (Beginning in 2018, the default fund will change from the G Fund to an appropriate Lifecycle Fund, see next paragraph. If you began a TSP before 2018, check your fund selection – you may be in the G Fund.) • Think about the Roth-TSP option. The Roth-TSP became available in 2012 and can be a good option for many military members. While Traditional (pre- tax) contributions are beneficial for some members, Roth (after-tax) contributions offer a substantial advantage for those who are generally in a low tax bracket. Under the Roth option, your contribution is taxed during the current year and your TSP will grow tax-free in your Roth-TSP account. • Lifecycle Funds may be a good option. If you want to put your TSP on autopilot and allow the professionals to rebalance your portfolio based on the recommended balance of stocks and bonds for your investment time horizon, the Lifecycle Funds are a great option. There are five choices based on the year you anticipate withdrawing money from your TSP account: L Income, L 2020, L 2030, L 2040 and L 2050. The table below can be used as a guide to help you choose the correct fund. Choose If your target withdraw date is: L 2050 2045 or later L 2040 2035 through 2044 L 2030 2025 through 2034 L 2020 2018 through 2024 L Income Before 2018 Source: www.tsp.gov • TSP investing is long-term. While TSP offers substantial tax advantages over the long run, retirement accounts are illiquid assets and there is a significant penalty for withdrawing funds prior to age 59½. The TSP should not be relied upon for short-term expenses (i.e. paying off credit card debt or making a large purchase). The TSP consistently receives high praise for keeping fees to a minimum, resulting in large savings over time. It is a great option for reservists, and it only takes a few minutes to enroll in Direct Access. — Submitted by Cmdr. Shad A. Thomas Cmdr. Thomas currently serves as Financial Management Program Manager at Coast Guard Headquarters. He is a Certified Government Financial Manager and completed the Certificate in Financial Planning Program at Georgetown University. Rese R vist Magazine t he M o R e Y ou k now 48 RESERVIST � Issue 4 • 2017

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