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A Foolish Take: A Retirement Plan to Protect Veterans

By Dan Caplinger - Nov 11, 2019 at 12:01PM

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The Thrift Savings Plan lets military service members and other federal workers set aside money for their golden years.

Every year, we honor veterans of the U.S. armed forces for their service to their country. Yet just like every other American, veterans have to do their best to plan for the financial needs that retirement will bring. Often, being a veteran means facing additional challenges that most people don't, and that can make it even harder to come up with a workable financial plan.

To help military service members with their financial needs in retirement, the federal government gives them access to a unique retirement plan called the Thrift Savings Plan. This low-cost plan has five different funds, giving access to a variety of stock and bond investments. Participants can choose how much to invest and which funds they want.

As you can see below, Thrift Savings Plan assets have more than doubled over the past decade, thanks largely to a strong stock market.

Bar chart of annual investment totals in Thrift Savings Plan over the past 10 years

Data source: Federal Retirement Thrift Investment Board. Chart by author.

The limits on putting money into the Thrift Savings Plan are generous, matching what private employees get from 401(k) plans. Military members can contribute up to $19,000 in 2019 and $19,500 in 2020, with those 50 or older getting even higher limits of $25,000 and $26,000, respectively. That's a lot, and it's a huge percentage of base pay for a typical service person, but even contributing less than the maximum can make a big difference.

Also like a 401(k), the government offers matching contributions to some participants. Those who joined the military in 2018 or later or who opted into the Blended Retirement System can have their contributions matched dollar-for-dollar up to 5% of their pay.

So as we remember our veterans today, it's important to make sure that we give those currently serving in the military the tools they need to be financially secure. The Thrift Savings Plan is a key part of the arsenal our military members have to accomplish that mission.

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