Members of the military have access to special savings opportunities, but they don’t always make the most of these benefits. It can seem difficult to afford to set money aside for the future when you’re focusing on paying your regular bills and dealing with extra challenges like frequent moves and deployments. But even if you start small and save regularly, your savings can grow significantly over the long run and make a big difference in your financial future — especially when you get tax benefits and matching contributions. Here’s how to get started.
Make the Most of Free Money for Your Thrift Savings Plan
The easiest way to build your savings is to contribute to the Thrift Savings Plan and make the most of matching contributions from the Department of Defense — that’s free money. This includes Federal Employees Retirement System (FERS), Civil Service Retirement System (CSRS) or Blended Retirement System (BRS) participants who started or rejoined federal service on or after Oct. 1, 2020. That means military service members are automatically enrolled in the TSP, and 5% of their basic salary goes toward the savings plan. But anyone in the military can benefit by saving automatically in this low-cost, tax-advantaged account.
Automate Your Savings
Whether you’re saving for retirement in the TSP or working toward shorter-term goals, such as a vacation or house down payment, it’s easiest to build up your balance by making your savings automatic.
“The best and easiest way to save is to save automatically, either through a split deposit at a financial institution or by an allotment from pay,” said Lila Quintiliani, program director for Military Officers Association of America. “Even just a few dollars per pay period can add up. The best part is that when you save automatically, you truly ‘set it and forget it’ — you won’t miss that money because you won’t even see it and you’ll be building that savings habit.”
TSP contributions are automatically deducted from your pay, and you can also set up automatic deposits into separate bank accounts for other purposes. “I like to have separate, earmarked savings accounts for various goals,” she said. “For example, a ‘Hawaii account’ or ‘mountain bike account’ makes it easier to visualize what you are saving for and can be a motivating factor when it comes to ramping up your savings.”
Even if you can only save a little bit, starting small can get you in the saving habit. “Most people can afford to save something, whether it’s small like $5 per week or $20 per month,” said Shay Cook, financial readiness manager for the FINRA Investor Education Foundation. “Starting small is OK and you can grow it as you make more money and pay off debt.”
Make Extra Money Go Further
Make a plan for any extra money you receive from a tax refund, bonus or stimulus check before you have a chance to spend it on anything else.
“If someone is receiving a raise or bonus in the near future, they should plan to put it toward their most important financial goals, such as paying off debt, emergency savings or retirement,” Cook said. “I recommend people apply their stimulus and tax refunds to high-interest debt, such as credit cards and personal loans, save a portion — especially if they don’t have an emergency fund — and spend 5% to 10% of the money on something fun.”
It’s important to set specific and measurable financial goals, Cook added. “Set your goals. Plan the time and savings level to achieve your goals,” she said. “Stick to the plan. Find an accountability partner. Many people develop great savings plans but don’t execute them. You have to check in with yourself often (around payday is a great time) to make sure you are moving forward with meeting your goals. Of course, distractions such as PCS moves, deployments and the like happen and you may get off track, but be flexible and kind to yourself and you can meet your savings goals.”
Make the Most of Special Saving Opportunities When You’re Deployed
It may be more difficult to focus on saving for the future when you’re deployed. But it’s a good opportunity to boost your savings. You’re allowed to save much more money in your TSP when receiving tax-free income while deployed — the contribution limit increased to $66,000 if you were deployed in 2022. That might be much more than you can afford to save, but you may be able to boost your contributions because your take-home pay will increase when you’re receiving tax-free income. And the money you contribute when you’re deployed gets special tax benefits — it goes into the TSP tax-free and comes out tax-free, too.
“When you are earning combat pay and [contributing] to the Roth TSP, that is pretty much the perfect savings scenario: that money will not ever be taxed, whether when you earn it or when you withdraw it after age 59 ½,” Quintiliani said.
Deployed service members also have another special opportunity to save: They can contribute up to $10,000 to the Savings Deposit Program, which earns 10% annual interest guaranteed. It sounds too good to be true, but it is actually a special savings benefit for deployed service members.
You can deposit the money into the account while you are deployed and for up to 90 days after you return. It’s a great way to accelerate your savings toward short-term goals, such as a down payment for a car. See the Department of Defense’s Savings Deposit Program page for more information.
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Jake Arky contributed to the reporting for this article.