What Military Savings are there?
Thrift Savings Plan (TSP)
The military offers a federal program called Thrift Savings Plan (TSP) allowing service members to place part of their monthly pay into an account very similar to a 401(k) plan in the civilian world. The annual limit set by the Internal Revenue Service as to how much a service member may invest annually is $15,000. If the service member is over the age of 59, he or she may contribute an additional $5000 as a catch-up payment. There is not any yearly participation commitment and the money invested in the TSP belongs to the service member regardless of how many years they serve or invest in this plan.
The contributions are pre-tax dollars and reduce the service member's income subject to taxes. The accounts are not subject to taxes until they are withdrawn from the plan. However, withdrawals made prior to the age of 59 ½ maybe subject to a penalty. TSP accounts may be rolled over to other plans such as IRAs or employer retirement accounts. The money may also stay in the TSP until the service member leaves the military.
Special Savings Deposit Program for Combat Zones
There is a very nice program for service members who are deployed to designated combat zones. They are able to earn a guaranteed 10 percent interest rate on their savings. The limit to contributions to this plan is $10,000 and the interest earned is taxable. Those service members serving in the Balkans, Operation Iraqi Freedom and Operation Enduring Freedom are eligible for this program. There is a requirement that the monies must be withdrawn within 90 days of returning from one of these deployment regions but the service member will receive the 10 percent interest rate for the term of their deployment up to the contribution limit. However, withdrawals made prior to the age of 59 ½ maybe subject to a penalty. TSP accounts may be rolled over to other plans such as IRAs or employer retirement accounts. The money may also say in the TSP until the service member leaves the military.