What's So Great About the TSP?

By The USAA Educational Foundation

Military millennials: Are you ready to start investing for retirement? Don’t overlook one of the easiest ways to get startedthe Thrift Savings Plan, or TSP. This tax-advantaged program allows service members to invest money for retirement through payroll deductions. Think of it as the federal government's version of a 401(k). 

Though employer-provided plans like the TSP sometimes get knocked for a relatively limited array of investment options, there are lots of reasons to get the ball rolling. You should strongly consider signing up because:  

  • It’s easy. Just set it up, so part of each paycheck goes into the TSP through the automated myPay system. You can access your account through the TSP website (tsp.gov) or the Thriftline phone number (1-877-968-3778).
  • It’s automatic. Once you’re set up, TSP contributions are taken from your paychecks before you ever see the money. When it comes to saving and investing, if you don’t see it and don’t have to think about it, you’re more likely to do it.
  • It’s tax deferred and affordable. Like with IRAs, federal income taxes on earnings in your TSP are deferred until they are withdrawn. Plus, TSP expenses are low compared to civilian employer-provided plans and other mutual funds inside or outside IRAs. All of this means more of your money goes to work for you.
  • It has traditional and Roth options. Just as there are traditional and Roth IRAs, there are traditional and Roth TSPs. Based on what will work best for you from an income tax perspective (both now and when you withdraw during retirement), you can direct TSP contributions to a traditional account, a Roth account, or some of each.
  • It has a lot of investment choices. Within the TSP, you can create a diversified portfolio of investments at the right level of risk for you. You can stick with lower risk government securities or fixed income index funds. You can go mid to high-risk common stock, small cap, or international funds. You can even choose lifecycle funds that adjust risk over time.
  • It has high contribution limits. The TSP’s annual limit is about 3x the amount you can typically contribute to IRAs. Contribute from basic pay, incentive pay, special pay, and even bonus pay. For example, the 2015 and 2016 max was $18,000 — those receiving tax-exempt combat pay or age 50+ could contribute even more.

If there’s just one step you take towards a retirement strategy, the TSP is it. Long story: Yes, you’ll need to think it over, choose investment options, and set up contribution amounts within the rules. Short story: As a member of the military, the TSP should be one of your top retirement planning choices.


The USAA Educational Foundation, a nonprofit organization, does not endorse or promote any commercial supplier, product, or service.

Tip of the Day

  • Written by | April 17, 2014

    Check out these "6 Tips to Help Reduce Credit Card Debt" at http://t.co/kPuiEOOyGA

Saver Stories View all »

How Smart Financial Decisions Can Create Opportunities 

Written by | November 22, 2019

Written by Stephen Ross, America Saves Program Coordinator | November 22, 2019

Of the many stories Military Saves shares, most describe how someone was in dire straits financially and worked their way out of it with the help of Military Saves. This time we want to highlight a different kind of story. This is a story about how responsible financial decisions can build on one another to create opportunities you thought only the super-rich enjoy.


Setting a Goal Leads to Success

Written by Super User | May 24, 2019

Growing up, Marisa’s dad had always talked about saving first, but she said she didn’t really internalize it until much later. “I was drifting along with no plan, carrying a little bit of revolving debt, saving some money here and there, but without a real plan for it.”


When You Start Small, Saving is Easy

Written by Lila Quintiliani | August 12, 2019

When Attiyya first got married, she and her Marine husband had just graduated from college and were focused on paying off student loan debt. They had both attended private schools and had sizeable loans. Then three months after the wedding, the couple found out they were pregnant with their first child.

The first year of their marriage, says Attiyya, was a balancing act between paying down debt and saving for the future.