Can You Still Contribute to TSP After the Military?
Saving money while you are in the service is important. The Thrift Savings Plan is a way to do, so that is available for members of the United States uniformed services, as well as civil service employees and retirees. It permits them to save for retirement early. For those still serving, a question remains: can I contribute to my TSP after the military?
Unfortunately, you cannot contribute to your TSP after the military. However, you can:
- Open a different retirement plan so that you can continue to save for your future
- Get a TSP back by becoming a member of the civil service again
Keep reading to learn more about contributing to your TSP after the military. There are a few critical items you should understand to ensure that you will get the most out of it before shutting down the plan. There are methods that you can follow to continue saving for your retirement.
Can I Contribute to TSP After the Military?
As stated above, you cannot contribute to your TSP after the military. This is because you are leaving a position under the federal government, who is the employer in the instance of a TSP. Without the employer to match your payments, there is little point in having the account.
Luckily, leaving the military does not mean that you have to give up what you have developed and earned through your TSP. When you are complete with your service, you can:
- Move your money into another plan
- Carry on with your tax benefits
- Withdraw your money in a lump sum
You cannot contribute any more to this plan, but it is still possible to build up your retirement in a different location. You do not need to lose what you have spent your entire time in the service building up.
This article will go over a few of the things that you can do with your TSP after the military so that you are prepared when the time comes. It might seem scary, but there are plenty of good options out there that will still help you prepare for the future.
Read on to further understand what you can do with your money after your military TSP ends. You will be fine if you know what to do.
What Do I Do With My TSP So I Can Keep Investing?
If you cannot put more money into your TSP account, what are you supposed to do with your funds? How can you take them out or continue to save for your future?
As mentioned above, there are a few things that you can do with the benefits that you have built over the years.
This article will discuss each of them so that you can make the transition and start saving. Many plans available to civilians are not too different from the military TSP. You have a large variety of options to choose from.
Take Out a Lump Sum
If you want access to the money right away, you can take it out of your TSP in what is known as a lump sum. This will remove it from your retirement preparation and allow you to spend it right away. If you take it all out, you can use it however you would like. Many utilize the money to pay for a home, groceries, or even a car.
Taking the cash out can benefit you if you are leaving the military with no career prospects, and thus have no guaranteed source of income. It can allow you to get on your feet and settle back into the normal world until you have the opportunity to get a job. However, there are some disadvantages to doing this.
A lump sum:
- Requires a large tax when removed
- Adds an early withdrawal fee to your amount
If you take the money out of your TSP, you will be losing some of the money no matter what intention you have for it. This should be your choice only if you know the money is going to save your life once you are free. It is not a good option at all in general, especially if you have a solid amount saved up.
Roll Your Assets Into an IRA
Rather than removing everything, you can also roll your assets into an IRA. The Individual Retirement Arrangement will give you free rein of your account. There are unlimited investment options, and you can always change your mind and put the cash in a 410(k) if you decide that is more beneficial.
An IRA is great for a few different reasons. For instance:
- They are easy to set up
- Tax advantages are available
- You get many investment opportunities
It is pretty easy to roll your finances over into an IRA. Some fees may need to be managed, but other than that you are good to go. In general, you can move the money over either by rolling it directly or taking it out in a lump sum and moving it. The first is easier and keeps all of your earnings in one place.
An IRA is a much better option than taking out all of your money and spending it. It will help you prepare for the future, rather than taking away from it. You can always move it from here later if you want to do something else.
Keep Everything in the Account
Of course, you can always keep everything inside of your account and leave it alone. This is nice, but it is another account that you will need to manage. As we discussed above, you also cannot invest any more money into the TSP. However, it is very safe and will not be impacted by outside forces until you withdraw it for retirement.
Keeping everything inside of the account:
- Has lower fees than most banks
- Allows for flexibility later
- Gives potential tax considerations if you started the account in a war zone
Many financial experts will recommend that you keep everything inside of the account. Fees will stay low, so it is more likely that your money will stay in one piece as you decide what you are doing with your life.
If you are unsure of the future, you should keep your money in your TSP. You will always know that it is there, even when the road ahead looks uncertain.
Push Your Assets Into a 401(k)
If you are going straight to another employer, you can roll your assets over into a 401(k) for your civilian job. This is the most reminiscent of a TSP, which is essentially the 401(k) of the military services.
You should put your assets into a 401(k) if:
- Your employer has a good matched offer for your contributions
- The match does not decrease over time
As with the IRA, you can rollover your funds either directly or indirectly. Examine your options carefully to determine which is the right choice for you.
A 401(k) is one of the best things you can do to continue investing, along with an IRA and leaving your TSP alone. Taking out a lump sum should only be a last-resort option. You are better off ensuring that it will grow.
Conclusion
As a former member of the United States military, you cannot continue to contribute to the TSP after you leave. However, there are many other ways that you can continue to prepare for your retirement after your service.
From rolling the funds over in an IRA to withdrawing a lump sum, you can do what you would like with the money you have earned, including real estate investing! After all, you deserve security and the benefits that come with it.
Sources:
https://militaryfamilies.com/money/tsp-after-the-military/
https://www.tsp.gov/publications/tspfs05.pdf
https://www.investopedia.com/articles/personal-finance/120315/what-good-401k-match.asp
