[vc_row][vc_column width=”2/3″ el_class=”section section1″][vc_column_text]You have probably heard about the plans to increase the tax-deductible contribution that you can make on elective retirement plans like TSP in 2019 but did not understand what that meant. How will it affect those contributing from their military pay?
What this means is that if you are a part of TSP, the maximum contribution allowed will rise from $ 18,500 to $19,000. However, you can only manage to save that much if you take actions and plan well. If you are making deductions from your military pay, it is up to you to work on making adjustments if you wish to maximize the amount.
How is that done?
To change your contributions plan, you have to go to my myPay website. At the site, you will be asked to specify the percentage of the base pay that you want to contribute to TSP. That is the percentage that will be withheld from each paycheck.
- Also Read: 3 Reasons Certain Federal Employees Can Retire Years Earlier Than Their Peers Without Penalties
- Also Read: CSRS Retirement in 2024: Are You Making the Most of What This Classic Plan Has to Offer?
- Also Read: Roth IRA Basics for Beginners: What’s There to Learn?
How do you know your maximum TSP contribution?
You can only tell DFSA the percentage of your earning to withhold as your contribution. So how do you calculate the proper percentage that will maximize your TSP? Here is a simple illustration on the same.
From 2019, the maximum contribution will be $19,000. Take that amount and divide it by 12 to know your maximum monthly contribution. The result will be about $1,583.33 per month to help you reach your goal. You then divide $1,583.33 by your 2019 salary to know your percentage.
If you are an E-5 with at least six years in service, in this case, your base pay in 2019 will be $3,001.36 per month. This is equivalent to 53% of your base pay every payday. If you are an O-3 with four years service, it will be 28% which is $1,583.33 divided by your base pay of $5,671.52.
It may sound like a lot as it is over half of your base pay in case you are an E-5.
You should not forget about allowances and other special pays that have to be drawn along the base pay. If you are a military member in operation, there are limited places and ways to spend your money. The best decision is to contribute as much as you can to TSP.
Some individuals may opt to withhold nothing and instead put the entire amount. Doing that will only make you lose the DoD 5% match. It is recommended that you contribute 5% of your base pay every payday to help you get the DoD 5 percent match rather than throwing the free money away.
Keeping up with the military pay changes
The pay benefits keep changing, and you must make efforts to ensure that you are up to date with all the updates and your earnings.[/vc_column_text][/vc_column][vc_column width=”1/3″][vc_single_image image=”35755″ img_size=”292×285″ style=”vc_box_shadow”][/vc_column][/vc_row]
