Tips For Maximizing Your Tsp
The following tips can help you maximize your Thrift Savings Plan contributions. The sooner you start, the better off youll be when it comes time to retire from the military.
Contribute at least 5%.
The TSP matching contribution comprises two parts: automatic 1% match and 4% agency match. If you do not contribute at least 5% of your pay, you are not making the most of what’s being offered to you. If you are participating in the BRS but not contributing to your TSP, you will only receive the Department of Defense’s 1% automatic contribution. If you do not contribute to your TSP, you do not receive any matching contributions.
Make catch-up contributions.
Catch-up contributions are extra deposits you can begin making into a TSP any time starting in the year that you turn 50 years old, as long as you expect to make the maximum regular contribution as an eligible federal employee. This gives you the chance to save up more for your retirement. You decide how much you want to deposit, and it’s automatically deducted from your basic pay every pay period. There is a yearly limit, determined by the IRS. Catch-up contributions automatically stop when you reach the limit or when the calendar year ends whichever comes first. They don’t continue from one year to the next. You must make a new catch-up contribution election each year.
Traditional TSP vs. Roth TSP.
Weigh your options.
Stay up to date.
Military Retiree And Annuitant Pay Dates
Here are the military retiree pay dates for 2022. You will need to check MyPay for your retiree account statement .
The above military pay dates are applicable to all branches of the military, including the Air Force, Air Force Reserves, Air National Guard, Army, Army National Guard, Army Reserves, Marine Corps, Marine Corps Reserves, Navy, Navy Reserves, Space Force, Coast Guard, Coast Guard Reserves and the Public Health Service.
Federal Civil Service Retirement
If you retire from the military and are retired/retiring from Federal Civil Service, you can elect to waive your military retired pay in order to include your military service in the computation of your civil service annuity.
However, for retired reservists, this is true only if you are service retired years of service or disability retired. If you are age retired then there is no waiver or offset. If you choose to do so, you need to notify DFAS, in writing, at least 60 days prior to your planned civilian retirement date. It is suggested that you contact your civilian personnel office prior to the submission of your waiver request to ensure that you are aware of all the available options.
If you elect survivor coverage from your civil service annuity, your military survivor benefit plan participation will be suspended while you receive the civil service annuity. If you want to retain military SBP you may do so, but you must then decline survivor annuity from the Office of Personnel Management. If your pay is subject to court-ordered distribution, you must authorize an allotment in an amount equal to the distribution, in order to include military service in the civil service annuity computation.
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Retirement Pay For E7 With 20 Years
For all the non-commission officers who have been in for a while and are planning on retiring soon, it’s important to understand how much retired pay you’ll be entitled to.
Its common knowledge that many entered service not only collect a basic pay and housing allowance, but also to complete 20 years or service to earn retirement benefits.
The retirement system calculator is a tool that can help you estimate your monthly retirement benefits when you retire from service. However, there are many other factors that will affect your final earnings including: the number of years served, rank, time in service and whether or not you’re married.
For retired military personnel to get an accurate calculation of what your monthly pay might look like before you make any decisions about leaving the military watch this video to calculate your retired pay after active service.
If you are an E7, chances are you have been thinking about your retired pay for when you retire. But what do the numbers really mean?
This tool can help you determine if it’s best for you to retire now, wait until later, or postpone your decision altogether. You can also use this calculator as a tool to estimate how much money will be lost in benefits by electing early active duty retirement pay versus delaying that election until later in your career when more years have been added onto your service time.
-> Click the Photo to Access the Calculator < –
Your Retirement Pay Is Taxed
While your retirement income will be subject to federal income tax, you will be exempt from paying into Social Security/Medicare since it is not considered earned income.
You may choose, however, to retire to a state with no-income tax. If we take a look at a map of where all current DOD retirees choose to live, its is obvious plenty of servicemembers opted for states with no income tax:
If you want to learn more about the best states for military retirees, checkout our blogpost here!
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Sold Back Leave Payments Get Paid Out Whenever
Many servicemembers will be leaving the military with banked leave. If you are in this boat, I would reccommend using the leave rather than selling it. If you opt to use the leave rather than sell it, that means you will still qualify for active-duty healthcare benefits, while also earning income while looking for your new job
However, if you do opt to sell back your leave, the amount of time it takes for the money to enter your bank account can vary. It could be months before you actually see any of your money, so make sure not to budget this money into your post retirement bills.
Military Retirement Pay Computation
For members who entered active duty or on prior to September 8, 1980, retired pay amounts are determined by multiplying your service factor by your active duty base pay at the time of retirement.
If you entered active duty after September 8, 1980, the base pay is the average of the highest 36 months of active duty base pay received. Additionally, your initial cost-of-living adjustment will be reduced by 1%.
The “multiplier” for the above two plans is 2.5% . For example, a person who entered active duty on or before September 8, 1980, and spent 22 years on active duty, would receive 55% of their base pay as retirement or retainer pay.
A person who entered active duty after September 8, 1980, and spent 22 years on active duty, would receive 55% of the average of their highest 36 months of active duty base pay.
If you are a commissioned officer or an enlisted with prior commissioned service, you must have at least 10 years of commissioned service to retire at your commissioned rank. If you have less than 10 years of commissioned service, and voluntarily retire, you retire at your enlisted rank, and only the highest 36 months of active duty enlisted base pay counts for retirement computation.
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How To Use The Final Pay Military Retirement Calculator
Service members who entered the armed forces before Sept. 8, 1980, and are still serving can use the Final Pay Calculator to estimate their future military pension amount. Service members who joined the service after Sept. 8, 1980 use the High-3 calculator.
Of all the retirement plans, the Final Pay system uses the simplest formula. Youll receive 2.5% of your final monthly basic pay for every year of service. For example, if you retire after 40 years of active service, then you can expect to receive 100% of your monthly base pay as your retirement pension.
For the Final Pay calculator, youll enter all the same information that the other service members did for the High-3 calculator.
You can also reset the calculators results by adjusting the factors. For example, delaying your retirement year may result in a higher base pay due to automatic cost-of-living adjustments, even if you dont get a promotion. This would increase your retirement pay.
If you joined after 2018, use the Blended Retirement System calculators for active duty or those in the National Guard or reserves.
Remember, the sooner you start planning for your transition to retirement, the more money youll have to spend when you get there.
Annual Military Retirement Pay Increase
The cost of living adjustment for 2023 will be 8.7% for Social Security checks, VA disability compensation and other government pension and benefit programs.
COLA raises for Social Security benefits and certain other benefits are automatic. However, each year Congress must pass a bill to implement COLA raises for veteran benefits, including disability and dependent compensation, clothing allowances and dependency and indemnity compensation.
Military retirement pay COLA increases take effect in your January 2023 payment.
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Va Disability Compensation Benefits
Veterans who have a service-related injury or illness may be entitled to VA disability compensation. Its a tax-free monthly benefit.
Visit VA.gov to learn:
Which conditions qualify you for benefits
How the claims process works
How to appeal a decision you disagree with. The process changed in February 2019.
Survivors of veterans may receive compensation benefits in certain situations.
How To Use The High
If you joined between Sept. 8, 1980, and July 31, 1986, you can use the High-3 Calculator to figure out your estimated base pay. This retirement plan offers a pension after 20 years of service that equals 2.5% of your average basic pay for your three highest-paid years or 36 months, for each year you serve. Thats why the plan is sometimes called the High-36.
For example, retiring with 20 years of service means that your retirement pension will be 50% of that highest 36-month pay average. Waiting to leave after 40 years will make your pension 100% of your monthly pay average.
You may also receive additional payments from your Thrift Savings Plan, if you have chosen to contribute.
Heres how to use the High-3 calculator to see your total projected retirement payments.
Remember: your highest 36 months of basic pay determines your eventual pension rate. So, the calculator asks what you think your pay grade may be every year to your projected separation year.
If youre not sure, the system automatically fills in each years possible pay grade following a typical military career progression. You can simply continue from this step, or you can override the calculators suggestions with the drop-down menu.
The High-3 calculator shows your estimated retirement benefits in three different tabs.
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More Benefits: Veterans Affairs Health Care And Insurance Systems
All veterans receive coverage for most care and services, but only some will qualify for added benefits like dental care. The full list of covered benefits depends on your priority group, the advice of your VA primary care provider and the medical standards for treating any health conditions you may have.
- If you are a retired service member, both you and your family have access to Tricare, the militarys health care plan. If you have other forms of health care coverage , you can use VA health care benefits along with these plans.
- Disability pay from the VA is also available for service-connected injuries.
- The Post-9/11 GI Bill helps you pay for school or job training if youve served on active duty after September 10, 2001.
Military members have access to other benefits, such as special types of checking and savings accounts within financial institutions, VA loans for purchasing a home or access to additional select credit lines to help start a business after separating from military service. Military members and their families also have several unique considerations when it comes to choosing auto insurance coverage.
It’s also essential to go with the right life insurance, whether that’s one of the government-sponsored programs or a private-sector policy. Before purchasing a plan, it’s crucial that you assess your needs and compare life insurance policies to ensure you get the coverage you need at a price you can afford.
Understanding Your Retired Military Pay
Military retirement pay is handled by the Defense Finance and Accounting Service, or DFAS. They handle all record-keeping, tracking, payments, etc. Retirees can track their pay on MyPay.
Log on to your MyPay account and view your Retiree Account Statement , a two-page document the DFAS issues that summarizes your pay, benefits, and any deductions, including allotments.
As a military retiree, youll receive a retiree account statement each month, along with an annual RAS in December. MyPay makes the previous 12 RAS statements available to you. If you want to keep a long-term record, download the RAS in PDF format.
You can provide your email address on MyPay and opt-in to receive an email reminder each month when your RAS is available.
Other ways to use MyPay: In addition to tracking and downloading your Retirement Account Statements, you can also use MyPay to download your tax forms, change any allotments you might have, and change your banking or contact information.
Your retirement pay is made in arrears, meaning you receive pay for the previous month.
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Converting Points To Year
To determine how much retired pay a member is eligible to get, calculate the number of equivalent years of service:
Total Number of Retirement Points ÷ 360
This formula determines the number of comparable years of service the member completed . Ten years of equivalent active-duty service amounts to 3,600 points.
Figuring payment is the same as for active-duty retirement pay:
Basic Pay × Number of Years Equivalent Active-Duty Service × 2.5%
Contingent on when a member joined the military determines whether a member is eligible for this amount or the smaller, averaged amount.
Military Retiree Pay Options
They can be confusing for military retirees and service members counting their retirement points. What if you could look at one simple online calculator and be able to see your military retirement pay for any rank or number of years served before deciding whether it’s worth staying in the military? Like all things in the military, there are several factors that contribute to determining your retirement pay.
Retirement pay is determined by multiplying your average base pay for each year of service times 2.5 percent. That’s multiplied again by the number of years you’ve served over 20 years. However, most people have seen their military pay decrease year after year due to the pay caps imposed by Congress for military personnel. You also have to be aware of how long you’ve served plus any other time in service that could affect your final number.
The government has a few legacy military retirement pay programs. The choices of which one to choose will depend on when you enter military service. Veterans in active service after 1986 have enrolled in the Final Pay Retirement Pay System or High 36 Retirement Pay System. Those whose registration was made after 1 January 2019 will be eligible for the Blended Retirement System.
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How Can You Maximize Pay Based On Years Of Service
Basic pay is based on rank and length of service, with automatic raises when service members meet certain time and promotion markers. Congress decides each year how much of an increase all troops should get.
Service members are financially rewarded the longer they stay in the service through continuation pay when a service member reaches 12 years of service. To receive continuation pay, you need to commit to an additional four years. It is taxable, but you can contribute all or part of it to your TSP. You can also choose to receive it in a lump sum or in installments over four years to reduce taxes.
Active duty members get 2.5 times their monthly basic pay as of the first day of their 12th year of service, while reserve and guard members get 0.5 times their monthly pay. This is except for those in the Army Reserve and National Guard, who get four times their monthly pay.
How Can My Retirement Pay Continue To Go To My Family If I Die
The Survivor Benefit Plan allows a retiree to ensure a continuous lifetime annuity for their dependents after they die. The annuity, based on a percentage of retired pay, is paid to an eligible beneficiary. Unlike some other annuities, payments can never run out. If you die before your spouse, they will continue to get monthly checks until they pass away.
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Can I Lose My Retirement Pension
Yes, the pension is tied directly to the life of the retiring service member, but no one else. This means that when the veterans dies the pension payment ends. This is why its important to implement a military retirement pension protection plan. The plan must be implemented before the veteran dies or else all of your hard earned retirement benefits will go to waste.
We can also help you figure out how much money you should put into this type of protection plan. For example, if you know that your life expectancy is 40 years then you need to implement a military pension protection plan that will make sure your spouse will be taken care of for the rest of his/her life.
Five Myths About Annuities
About Ryan Guina
Ryan Guina is The Military Wallet’s founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.
Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.
Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.
Featured In: Ryan’s writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine , Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.
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