Thrift Savings Plan Provides Retirement Nest Eggs

By Gerry J. Gilmore
American Forces Press Service

March 19, 2009 - About 614,000 servicemembers are saving for retirement in the federal Thrift Savings Program, which was opened to military members in 2002, a senior Pentagon official said here today. The TSP, explained Chuck Witschonke, assistant director of military compensation for economic analysis, is a U.S. government-managed, 401(k)-type payroll-deduction program designed to provide tax-deferred retirement nest eggs for servicemembers and federal civilian employees.

"You can contribute pre-tax dollars, and all the money in your plan earns money, tax-deferred, until you take the money out when you're nearing retirement," Witschonke said in an interview with the Pentagon Channel.

Federal civilians have been eligible to use TSP since 1986, when Congress established the program, Witschonke said.

Today, about 614,000 servicemembers, he said, have money distributed among the TSP's investment-fund programs. They include:

-- Government Security Investment, or G Fund, which consists of treasury bonds and other federal-backed investments. It is considered among the most stable of the five TSP investment choices.

-- Common Stock Index Investment, or C fund, which consists of stocks of major established corporations. This option, along with the Fixed Income Index Investment, or F fund; the Small Capitalization Stock Index Investment, or S fund; and the International Stock Index Investment, or I fund, offer riskier investment strategies, but higher potential yields.

-- The Lifestyle Fund option, or L fund, which allocates money among the five funds and changes how they're distributed over time. The L fund automatically places money in the more risky, but higher potential yield funds early on, and later moves them to more secure, conservative investment options as the participant nears retirement.

TSP participants may change their investment options at any time, Witschonke said, noting changes can be made on the system's Web site.

Participants may withdraw some TSP savings, and then pay it back with interest, into the account, Witschonke said. However, he emphasized, participants should view TSP as a way to save for future retirement.

"This is long-term retirement savings. It's not savings for something that you might need in the near future," Witschonke said. "It's not where you should put money if you're saving for a car, or saving for a vacation."

Funds invested in TSP accounts "is money that you can afford to put away now that will be available to you in 20, 30, maybe even 40 years, when you're reaching retirement age and want some money to supplement your income," Witschonke said.