Photo By Staff Sgt. Krystal England | Staff Sgt. Gregory George, 20th Logistics Readiness Squadron allied trade technician,...... read more read more
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SHAW AIR FORCE BASE, S.C. -- The Thrift Savings Plan opened up a new savings plan, called Roth, for Air Force, Navy and Army members Oct. 1.
"TSP is basically a retirement plan that is available to active duty and certain Department of Defense civilians," said Airman 1st Class Saxon Hanwacker, 20th Comptroller Squadron special actions technician and a native of New York, "The traditional TSP basically allowed you to take tax deferred [which means you pay the taxes at a later time] and tax exempted funds and put them into a retirement plan which is tied to the stock market and government bonds in the investment world."
Roth is a new option for TSP users where their money is taxed up front instead of later like the traditional TSP does.
"The traditional TSP takes all of the money you put into it and taxes it at a later date," said Hanwacker. "It taxes the money you put into it plus the interest you earned. Roth taxes the money up front and saves you from paying taxes on the earnings."
People can sign up and change their address for TSP in myPay. There is a new section called Roth Contributions. Once, in myPay, people can decide if they want to put their money into a traditional TSP by selecting a percentage of their base pay or they can put their money in a Roth TSP and choose a dollar amount instead.
"You can divide your money however you want: do part traditional, part Roth; all traditional; or all Roth," said Hanwacker. "You decide how you want to do it on myPay. They are the same thing essentially. They use the same account that you have; TSP is just going to divide funds differently and taxed them differently."
"It gives people a little more freedom on how they want to be taxed," he continued.
While the money is in a TSP, it is treated the same whether it is in a Roth or a traditional TSP. After money is contributed to TSP, it is invested into bonds.
"These funds are linked to actual money vehicles outside of the military and government in the private sector," said Hanwacker, "The money automatically goes into government funds which is the safest vehicle TSP has."
According to the TSP website, a person can choose to have their retirement money invested in everything from a short-term U.S. Treasury security to index funds comprised of domestic and international stocks.
"You allocate the funds yourself in your TSP account by giving the percentage you want to go to each [type of fund]," said Hanwacker.
While the money is invested in the funds in the TSP, it grows because TSP compounds the money in the account.
Compounding is powerful because it allows people to make money not just on the money they contribute to the TSP account every year, but also on the money that the account earns. Compounding makes it possible for the retirement savings to increase exponentially, according to the TSP website.
"Give it a try," said Hanwacker. "At least go look at it on myPay or go to the TSP website. Try it out. You can stop the contributions at any time and if the amount you have in TSP is under $200, they will give it right back to you. You are only benefiting yourself."
For more information go to www.TSP.gov or contact 20th CPTS.
| Date Taken: | 10.01.2012 |
| Date Posted: | 10.19.2012 14:08 |
| Story ID: | 96461 |
| Location: | SHAW AIR FORCE BASE, SOUTH CAROLINA, US |
| Web Views: | 278 |
| Downloads: | 1 |
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