Day four, and I missed a day (or a few) — but the key to any goal is persistence.
The biggest thing about setting a goal and not actually completing it is not to bury your head in the sand, but to rise above it and start again.
Today’s topic is the Thrift Savings Plan (TSP) and it’s relationship to military retirement. As a veteran myself, I have firsthand experience with the TSP and how it has evolved over time. I’ll walk you through the two retirement systems — the legacy retirement system and the Blended Retirement System (BRS) — and offer general insights into how you might approach rollovers and retirement planning.
Note: This post is for educational purposes only and is not personalized financial advice. Please consult your own advisor to discuss your specific situation.
Legacy TSP Plan (Pre-2018)
Before January 1, 2018, service members were covered by the traditional military retirement system. Under this plan:
- There was no matching contribution from the government.
- Service members could contribute their own funds from base pay to the TSP, similar to a civilian 401(k).
- Retirement eligibility required at least 20 years of service, and the pension was based on years served (up to 75% of base pay).
This plan primarily benefited those planning to make a full career in the military. The defined benefit pension (the 75% cap) was a powerful incentive to stay for 20+ years, but it offered no retirement benefits to those who served shorter terms unless they manually contributed to the TSP.
Blended Retirement System (BRS)
On January 1, 2018, the Department of Defense rolled out the Blended Retirement System, a modernized approach that introduced a 401(k)-style matching component:
- The government automatically contributes 1% of base pay to the TSP after 60 days of service.
- Service members receive up to a 5% match (including the automatic 1%) if they contribute 5% of their own pay.
- Vesting of matched contributions occurs after two years of service.
- The defined benefit pension was reduced to 40% of base pay after 20 years (down from 50%), with matching intended to make up the difference.
This plan provides more flexibility and allows shorter-serving members to walk away with something in retirement savings. However, it also shifts more of the burden of retirement planning to the service member — making TSP rollover advice more important than ever.
Should You Roll Over Your TSP?
If you’re separating or retiring from the military, you may consider rolling your TSP into another retirement account, like a traditional IRA or a Roth IRA. Here are some pros and cons to consider:
Pros of Rolling Over
- More investment options — IRAs offer more than the five core TSP funds.
- Greater flexibility in retirement withdrawal strategies.
- Simplifies account consolidation if you already have other retirement plans.
Cons of Rolling Over
- TSP has some of the lowest administrative fees in the industry — most IRAs cost more.
- TSP’s simplicity and limited fund selection may be easier for some savers to manage.
- You lose access to TSP-specific withdrawal rules and benefits, like partial withdrawals.
General Recommendation
If you’re a disciplined investor who wants more control and options, rolling your TSP into an IRA may make sense. But if you prefer low-cost simplicity and don’t need broader investment choices, keeping your funds in the TSP could be the better option. Either way, you’ll want to evaluate your burn rate, debt obligations, and asset allocation — the same pillars we’ve discussed throughout this series.
Ultimately, retirement planning for military members isn’t one-size-fits-all. That’s why it’s important to work with someone who understands both the financial and service-side implications of your decisions.
Need Help with Your TSP Decisions or Military Retirement Plan?
I specialize in helping veterans and military families navigate TSP accounts, pension planning, and rollovers. Next post, I’ll discuss the different buckets you can invest in with the TSP, but in the meantime, let’s talk about what retirement looks like for you — whether you’re 5 years in or 5 years out.
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