Maximize Military Savings Rate: Smart TSP Contribution Strategy

TSP will match up to 5% of your base pay after 2 years of service.* If you contribute 5% your total will be less than 10% of your total income because BAH, BAS, and other

entitlements aren’t included. Figure out the math for your situation. The difference can be significantly different.

E-4 EXAMPLE

E-4 with 4 years of service in 2023 has a base pay of $2,914.80. BAH & BAS are calculated for Las Vegas.

Table 2.1 TSP Contribution with BRS Match

5% contribution 5% Match Total Monthly Contributions

$145.74 + $145.74 = $291.80$291.48 / $4909.36 = 5.94% Savings Rate

As you can see from the calculation, by only saving 5% of your base pay you are saving almost half of what you should be saving in order to reach that 12% goal. THAT INCLUDES

YOUR 5% MATCH!

Table 2.2 Monthly Income with Entitlements

Base Pay BAH BAS Totally Monthly Income

$2,914.80 + $1,542 + $452 = $4,909.36

Table 2.3 shows the amount you need to save to reach the target ravings rate. You can figure out what percent of your base you need to save if you subtract the match from the

total. The “% of Base” column is the amount you would need to set in MyPay in order to achieve the percentage listed in the “Target Savings Rate” column. You do need to enter

whole number so you will need to round up. This is not universal as BAH and BAS vary based on your duty location.

Here is what that difference can mean over 40 years. If you joined at 19.5 years old and started withdrawing money at 59.5 years it means your money would have 40 years to

work for you. This does not take into account any increases due to increased savings, promotion etc. It is the same contribution for 20 years earning 7.83% with an additional 20

years with no contributions due to separation from the military with the same annual growth.

Table 2.3 Target Savings Rates

Target Savings Rate Amount (-) Match % of Base

12% $589.12 $443.38 15.21%

13% $638.22 $492.48 16.9%

14% $687.31 $541.57 18.58%

15% $736.40 $590.66 20.26%