Thrift Plan Open Season a Military Success
By Jim Garamone
American Forces Press Service
WASHINGTON, April 26, 2002 The first open season for service members to sign up for the Thrift Savings Plan was a huge success, said defense officials.
The open season ran from Nov. 15 through Jan. 31, and more than 220,000 active and reserve component service members enrolled in the program. The next open season is May 15 through July 31.
"We thought maybe 10 percent of the active component would sign up in the first year -- we had more than 10 percent sign up in just the first open season," said Army Lt. Col. Thomas Emswiler. He's the executive director of the Armed Forces Tax Council.
Emswiler said officers and mid- to upper-level enlisted grades in particular signed up. "I'd like to see more junior members consider using the program," he said. "When you're young, start putting away $100 a month into the Thrift Savings Plan and it really can add up quite quickly."
He said he is particularly pleased with the response because TSP for military is a new program and the services are really just getting their education programs on line.
Emswiler said all service members should have received a pamphlet entitled "Summary of the Thrift Savings Plan for the Uniformed Services." Those who did not receive it or lost it can go to the TSP Web site. The plan summary is on the site as well as frequently asked questions, forms, savings calculators and records of fund earnings.
He suggested service members speak to civilian employees about the program. "The civilian component has been participating in TSP for quite some time," he said. "(Service members) should talk to the civilian employees they work with and see what their experience has been with TSP. I think most people will conclude it's a very good option."
The TSP for military program works like this: Service members can contribute from 1 percent to 7 percent of basic pay and from 1 percent to 100 percent of any special, incentive or bonus pays. TSP has five funds with different investment goals and varying rates of return. Service members can place their money in any or all the funds they wish. There is an $11,000 limit for contributions this year.
Emswiler said the TSP is a way to save and invest money on a tax-deferred basis. That is, contributions and earnings are not reported as income until they're withdrawn from the plan. TSP is a government-run plan that has historically had good rates of return at a very low administrative cost.
"But every member has to decide for him or herself whether thrift savings or any other investment vehicle is the right option," he said.
The TSP funds are government securities G Fund; Standard and Poor's 500 common stock index C Fund; government and corporate bond index F Fund; international stock index I Fund; and Wilshire 4500 "small business" stock index S Fund. Only G Fund accounts are guaranteed by the government; all others are subject to market forces.
Military and civilian personnel who had traditional individual retirement accounts or employers' 401-k account before they joined federal service may maintain them if they want, "but you can transfer the accounts into the Thrift Savings Plan and then have just one account to manage," Emswiler said. This change took effect July 1, 2001. Visit the TSP Web site for full details and application forms.
He called TSP a "portable" savings program. "Even if you don't stay in the military for a career, your TSP account belongs to you," he said. "And if you do stay in the military for a career, then you'll have even more savings available for your retirement."