THRIFT SAVINGS PLAN A retirement tool option for soldiers Army Community Service Financial Readiness Program DSN: XXX-XXXX CIV: XXXX-XXXXX

Objectives  Define Thrift Savings Plan as a long term retirement program.  Discuss how to participate and contribute to TSP.  Explain the difference between TSP and military retirement pay.  Identify the different types of TSP funds.  Discuss the ramifications of early withdrawal and what happens after separation from service.

A retirement savings and investment plan that has been available to government civilians since Purpose -- to provide retirement income, much like a civilian 401K plan. Allows soldiers to set aside a portion of their pay in a special retirement account administered by the Federal Retirement Thrift Investment Board. Money invested comes from pre-tax dollars – lowering your taxable income -- and earnings are not taxed until withdrawn during retirement. Thrift Savings Plan -- TSP

TSP and military retirement Participation in TSP is optional, not automatic. Soldiers contribute to TSP from their own pay on a pre-tax basis, what you contribute and any additional earnings are yours. Military retirement is a benefit program based on rank and time in service. TSP is a contribution plan, the balance in your TSP account is based on how much you contribute and the earnings on your contributions. Military Retirees may not contribute to TSP.

Thrift Savings Plan (TSP) Enrollment in the TSP began on 9 October Soldiers may sign up for TSP any time No more waiting for open season

Thrift Savings Plan (TSP) In 2005 soldiers could contribute up to $14,000 Soldiers also may contribute all or any whole percentage of any special or incentive pay To contribute from a bonus soldiers must be contributing from basic pay. Contributions are deducted per pay period. Individuals cannot send checks directly to the plan. Any contributions from a bonus must be deducted by finance at the time the bonus is paid. Soldiers may contribute to an IRA in addition to contributing to the TSP.

TSP Fund Options – G Fund G Fund- Invests exclusively in short term non-marketable U.S treasury securities. There is no credit risk - they are guaranteed by the full faith and credit of the U.S. Government. Lowest risk of all funds - has also the lowest rate of return. Average Rate of return since %

The C Fund invests primarily in the Barclays Equity Index Fund, a stock index fund that tracks the S&P 500 stock index. The C Fund allows participants the opportunity to diversify their investments and participate in the U.S stock market. Investment in the stock market provides the opportunity to earn relatively high returns. Because it is a diversified program it will lessen the effect of poor performance by individual stocks. Since it is tied completely to the stock market it has the highest rate of return - but also a risk. Average rate of return since % TSP Fund Options – C Fund

Invests primarily in the Barclays U.S. Debt Index Fund, a bond index fund that tracks U.S Government, corporate and mortgage-backed fixed income securities. The fund is a well diversified portfolio of high-quality fixed-income securities with a broad range of issuers, industries and maturities. The F Fund offers increased rates of return over the G fund especially during times of interest rate reduction. Average Rate of Return since 1995 – 7.72% TSP Fund Options – F Fund

The S Fund is a Small-Capitalization Stock Index Investment Fund that follows the Wilshire 4500 stock index fund. The Wilshire 4500 index contains all common stocks (except those in the S&P 500 index) actively traded in the U.S. stock markets on a daily basis. The S Fund offers increased rates of return over the F fund. The S Fund has a higher risk potential. Average Rate of Return since 1995 is 11.84% TSP Fund Options – S Fund

The I Fund invests primarily in the Europe, Australia/Asia, and Far East (EAFE) stock index fund. EAFE contains stocks that cover approximately 60% of the stock markets of the 20 countries included in the index. The I Fund potentially offers the highest rate of return. The I Fund has the highest risk of the 5 funds. Average Rate of Return since 1995 is 5.45% Note that rates on this fund have ranged anywhere from % to 37.94% annually TSP Fund Options – I Fund

TSP Fund Options – A new option  The L Funds provide a way to diversify your account among the G, F, C, S, and I Funds, using professionally determined investment mixes that are tailored to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account.  Because it is important for each L Fund to maintain its target investment mix, the TSP will automatically rebalance each L Fund daily. Then, each quarter, the investments in each L Fund will shift to a slightly more conservative mix. In addition, experts will review the investment mixes periodically to be sure they are still appropriate.

L fund “for instance” for  Who: Those withdrawing beginning  Moderate growth, moderate preservation of assets  Allocation adjusts 1/4ly

TSP is a long-term retirement program that provides special tax advantages. Withdrawals are limited to help to ensure retirement savings are used for that purpose. There are only two ways to withdraw prior to separation. If a soldier is 59-1/2 and still on duty (Reserves or Active). A Documented Financial Hardship Withdrawal prior to separation

If a withdrawal is taken, funds cannot be returned or repaid. Withdrawal prior to separation

TSP Loan Program  Allows soldiers to borrow against their retirement account.  Minimum loan $1,000  Maximum $50,000  Loan payback includes interest, but based on contributions  Soldiers are still accumulating earnings.

After separation Receive a single payment, all or a portion of the account can be transferred to an IRA, a 401K or a civilian TSP account. Have funds transferred monthly to an IRA or other retirement plan. Request a TSP annuity (must have a minimum of $3,500 in account). Leave money in TSP. Although soldier can no longer contribute to the TSP money in the account will continue to grow. Soldier must begin withdrawals NLT 1 April on the year they turn 70 1/2 and are separated from service.

Withdrawal without penalty Any funds withdrawn prior to age 59-1/2 are subject to the IRS 10% penalty and regular income tax. If a soldier separates at or after age 55, withdrawals are not subject to the IRS early withdrawal penalty. If a soldier separates prior to age 55 they may transfer their TSP account to an IRA, 401K, civilian TSP account or begin receiving an annuity without penalty.

Conclusion The TSP is a long-term retirement plan. It gives soldiers an opportunity to save and build a nest egg over the long haul, in conjunction with a retirement. Since it is controlled by the government it will always be a conservative investment, that will probably see continued steady slow growth. The TSP is not a short-term savings account. For the soldier who has time to allow the account to grow this is a great deal.

Review Objectives  Defined Thrift Savings Plan as a long term retirement program.  Discussed how to participate and contribute to TSP.  Explained the difference between TSP and military retirement pay.  Identified the different types of TSP funds.  Discussed the ramifications of early withdrawal and what happens after separation from service.

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