Understanding Vesting in the Thrift Savings Plan (TSP) and Retirement Saving Importance

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Explore the concept of vesting in the Thrift Savings Plan, learn why saving for retirement is crucial, and discover the benefits of early investing. Delve into the Blended Retirement System components and reasons to prioritize retirement savings for financial security.

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TC 5 Vesting In the Thrift Savings Plan (TSP) Internal

Agenda Vesting in the Thrift Savings Plan (TSP) Why save for retirement? Blended Retirement System overview Understanding the TSP How to access and manage the TSP Internal

What Does Vesting Mean? Internal

What Does Vesting Mean? Vesting = Ownership Timeframe of when you keep employer contributions Thrift Savings Plan (TSP) Civilian employer s 401(k) Makes employer contributions portable yours to keep after separating Internal

When Am I Vested? Serving before December 31, 2017* Opted into BRS 1% and matching immediately 1% vested after 2 years of service Matching vested immediately Serving after January 1, 2018 Automatically enrolled in BRS 1% after 60 days Matching starts at 2 years and you are already vested Vested after serving 2 years Your contributions are always yours to keep * There may be some exceptions. Internal

Why Save for Retirement? Internal

Reasons to Save The Three-Legged Stool Pension may not be an option or not enough Social Security may not be enough Personal savings is very important Health and longevity Inflation tools.finra.org/retirement_calculator Investing sooner than later Time builds wealth TSP matching Potentially greater returns than saving Compound interest Internal

Time = Money Start Early and Continue Basic Investing Start Age Monthly Investment Total Invested Total Earned* Pressy 20 $200 $108,000 $1,054,908 Mandi 25 $200 $96,000 $698,202 Steve 35 $200 $72,000 $298,072 *Assuming an 8% Rate of Return to age 65 Internal Basic Investing Handout Available

Blended Retirement System Overview Internal

The Four Components of BRS Defined Contribution TSP Contribution and match Continuation Pay Midcareer incentive (bonus) Defined Benefit Pension Lump-sum Option Advance Military Pension Member s TSP Contributions Automatic 1% into TSP Monthly Retired Pay Includes Lump-sum option TSP Matching TSP up to 4% Continuation Pay Earnings Retirement Age At 8-12 years After 20 years After 2 years After 60 days Internal Military Retirement Handout Available

Understanding the TSP Internal

What Is the Thrift Savings Plan? Defined Contribution Plan (TSP) Open to all military members and federal employees Similar to a civilian 401(k) Matching Contributions Up to 4% match Deposited into Traditional TSP After completion of 2 years Until you reach 26 years of service Professionally Managed Federal Retirement Investment Board Internal Thrift Savings Plan Handout Available

TSP Benefits and Contribution Limits Benefits Minimal administrative fees Automatic deduction Automatic and matching contributions Traditional and Roth options Many investment funds Tax advantages Contribution Limits Elective Deferral = $19,500 for 2021 Combat Zone = $58,000 for 2021 Catch-up (50+ years) = $6,500 for 2021 Internal

Five Core TSP Funds The TSP offers 5 individual funds that provide broad market diversification. C FUND Common Stock Index Investment Fund F FUND Fixed Income Index Investment Fund I FUND International Stock Index Investment Fund G FUND Government Securities Investment Fund S FUND Small Capitalization Stock Index Investment Fund What It Is: Stocks of large and medium-sized U.S. companies What It Is: Government, corporate, and asset-backed bonds What It Is: International stocks from more than 20 developed countries What It Is: Government securities that are specially issued to the TSP What It Is: Stock of small to medium-sized U.S. companies Pros: Potential for high investment returns over the long term Pros: Potential for high investment returns over the long term Pros: May earn returns that are higher than money market funds over the long term with relatively low risk Pros: Potential for high investment returns over the long term Pros: Does not lose money; has a consistent but relatively low investment return Risks: Can be volatile depending on stock market performance Risks: Can be volatile depending on stock market performance Risks: Can be volatile depending on stock market performance Risks: Bond prices fall when interest rates rise. Bonds may be repaid early, reducing your returns. Risks: Your money may not grow to meet your retirement needs or outpace inflation. Benchmark Index: Dow Jones U.S. Completion TSM Index Benchmark Index: Standard & Poor s 500 Stock Index Benchmark Index: MSCI EAFE Stock Index Benchmark Index: Bloomberg Barclays U.S. Aggregate Bond Index For more comprehensive information, visit tsp.gov and select Learn about fund options from the menu. Internal

TSPs Lifecycle Funds Each L Fund is a mix of individual funds based on when you ll need your money L 2065 L 2060 L 2055 L 2050 L 2045 Consider if you were born after 1999 or plan to withdraw from your account after 2062. Consider if you were born between 1995-1999 or plan to withdraw from your account between 2058-2062. Consider if you were born between 1990-1994 or plan to withdraw from your account between 2053-2057. Consider if you were born between 1985-1989 or plan to withdraw from your account between 2048-2052. Consider if you were born between 1980-1984 or plan to withdraw from your account between 2043-2047. For the long-term investor For the long-term investor For the long-term investor For the long-term investor For the long-term investor L 2040 L 2035 L 2030 L 2025 L INCOME Consider if you were born between 1975-1979 or plan to withdraw from your account between 2038-2042. Consider if you were born between 1970-1974 or plan to withdraw from your account between 2033-2037. Consider if you were born between 1965-1969 or plan to withdraw from your account between 2028-2032. Consider if you were born between 1958-1964 or plan to withdraw from your account between next year and 2027. Consider if you were born between 1958 or already withdrawing from your account. For the long-term investor For the medium-term investor For the medium-term investor For the short-term investor For those already withdrawing With the exception of L Income, the investment mix of each L Fund becomes more conservative over time. To change your investments, log in to My Account on tsp.gov and choose Contribution Allocation or Interfund transfers from the the menu. Internal

Evaluate Your Retirement Goals Evaluate annually Increase your TSP contributions Goals, risk tolerance, and fund selection Analyze your spending plan How much can you save? At least 5% of base pay Maximize benefits Traditional vs. Roth Review funds Meet objectives/risk tolerance/ time horizon Internal

Tax Treatment Options Taxes deferred Taxes paid up front Roth Traditional Tax-free when withdrawn Taxable when withdrawn Internal

How to Access and Manage the TSP Internal

How to Access and Manage TSP Step 1: Visit Direct Access Start stop change o Percentage of pay o Type (Traditional/Roth) Update address Step 2: Visit TSP.gov View portfolio Manage investments Change allocations Review and update beneficiaries Internal

Summary and Resources Internal

Summary Congratulations on reaching this important milestone! This anniversary marks an important achievement in your military career and in the Thrift Savings Plan. Let s recap what you learned: Vesting in the Thrift Savings Plan (TSP) Why save for retirement? Blended Retirement System overview Understanding the TSP How to access and manage your TSP Internal

Resources Checklist and Handouts Financial Education and Support Command Financial Specialists (CFS) Personal Financial Managers (PFM) Health, Safety and Work-Life (HSWL) Regional Practice CG SUPRT Financial Literacy Mobile Apps Coast Guard Work-Life mobile app DoD FINRED Sen$e mobile app Internal