LUKE AIR FORCE BASE, Ariz. — Saving money for retirement may seem overwhelming, but there is help for military personnel and federal employees.
Some of the retirement plans available are the Thrift Savings Plan, Roth Individual Retirement Account and the new Roth Thrift Savings Plan option, which is scheduled to be available to Air Force and Army personnel in October, according to Cory Carmichael, 56th Force Support Squadron Airman and Family Readiness Center community readiness specialist.
“The TSP is a retirement savings and investment plan for federal employees and military members,” Carmichael said. “It offers the same types of savings and tax benefits that many private corporations offer their employees under 401K plans.”
The advantages of having a TSP is that there is some control for where the retirement income is invested, said Ronald Lewis, 56th FSS A&FRC community readiness consultant.
“The money can be moved to different funds that are more or less risky,” Lewis said. “The more risk, the more chance of a potential return. I say, ‘potential’ since there is no guarantee on an investment.”
While this plan has its benefits, it also has its drawbacks.
With the TSP whether you are eligible to receive agency contributions will depend on how much your agency will put into your account during the years worked and the earnings accumulated over that time. If contributions weren’t previously taxed, they will be taxed upon withdrawal of the funds, Carmichael said.
Unlike the TSP plan where the amount received depends on the years worked and upon one’s agency, the final amount received with the Roth IRA depends on market growth.
“A Roth IRA is an individual retirement account that offers many tax benefits to the future retiree,” Carmichael said. “Contributions to a Roth IRA are made with ‘after-tax’ dollars and account holders do not pay taxes on withdrawals made in retirement. This in itself can be a big advantage for those who expect to be in a higher tax bracket later in life, which allows them to take advantage of market growth.”
Although, the Roth IRA has arguably been the best retirement product available, Carmichael said there is an even better option coming out.
“It’s called the Roth TSP. It can be better since it has very low management fees,” he said. “In addition, with the national budget being the way it is, the likelihood of tax rates going up in future years are very high. It all comes down to whether you’d like to pay your taxes now or later.”
Additionally, Carmichael said the Roth TSP greatly benefits military personnel who are deployed, since essentially no taxes will be deducted from the amount put in or taken out.
As it may be hard to decide what plan to go with, Carmichael recommends speaking with a financial counselor such as the ones in the A&FRC prior to making a final decision.
“If all these choices make you dizzy, speak with someone you trust to help you make a decision,” he said. “Just do it now and not later. I recommend you check out TSP.gov for detailed information on retirement options.”