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In order to maximize your 5% military TSP match, you must contribute at least 5% a month. The easiest way to do this is to spread your contributions evenly over the 12 months of the year.
Here's my best guess at the 2021 military TSP match, based on the proposed 3% pay rise and TSP “elective deferral” contribution limits staying fixed at $19,500. Please note this is not finalized until we know the contribution limits for 2021 TSPs and military pay is finalized by Congress.
The military TSP matching through the Blended Retirement System (BRS) is an excellent way for military servicemembers to build their retirement savings.
The BRS allows you to earn government matching up to 5% of your pay, so your military Thrift Saving Plan (TSP) account can grow faster. This is a improvement to the military retirement system for the more than 80% of servicemembers who will not earn a 20+ year military pension.
I earned $3295 extra in matching from 1 Jan – 31 Dec 2018. That's real money, especially compounded over 40 years at 7%, when it will grow to $49,340.
In 2019 I earned $3745 in military TSP matching. Again, over 40 years that will grow to $56,079.34. Plus my 2018 match, I am now projecting over $105,000 of lifetime of the TSP match in just 2 years.
The TSP Contribution Limits announced TSP limits are increasing to $19,500 for elective deferral (employee) contributions in 2019. That's a pleasingly round number of $1625 per month to max your military TSP.
Individual Retirement Accounts (IRAs, both Roth and Traditional), are bumping up to $6000 for the year. Again, a number easily divisible by 12: a nice round $500 per month to max your IRA.
Optimize your TSP Match Contributions With BRS
The BRS TSP match can be worth thousands per year if optimized correctly. The limiting factor is you have to contribute 5% each month, as the match is paid monthly.
Therefore, you do not want to make all of your $19,500 of contributions (the annual elective deferral limit) in the first 6 months of the year: you must space out your contribution for the full year if you want to receive the full match.
I used to front load my TSP contributions as fast as possible at the beginning of the year. Under the BRS, this is no longer optimal so I changed my contribution strategy.
Don't worry about going over the annual $19.5k limit. As long as you don't have another employer retirement account (401k, 403b, solo 401K), the DFAS computers will limit your final contribution to ensure that you max out the account without going a penny over. This can result in a nice bonus pay bump around Christmas and the end of year holidays.
How Much Should I Contribute to the TSP to Get the Full Match?
The chart above shows the percentage you should contribute monthly for all enlisted, warrant, and officer ranks up to O-8 and 26 years of service.
If you want to maximize your TSP contribution for the year ($19,500) and receive the full 5% TSP match you are eligible for, you must contribute at least 5% to the TSP every month.
The formula is pretty simple. Take your maximum elective deferral contribution limit of $19,500 in 2020. Divide by 12 months = $1625.00 Then divide $1625 by your monthly base pay to get a percentage of contribution.
For example, if your base pay is $5000/month, $1625/5000 = .325 or 32.5%. Round up to 33% because you can only elect contributions in whole percentages.
If you contribute 33% of your $5000 base pay, you will deposit $1650 each month into the TSP, Roth or Traditional. Therefore, up until November you will contribute $18,150.
In December, because you only have $1350 left of contributions, the TSP computers should only allow you to contribute $1350 and the remaining $300 will be returned in your paycheck. A nice Christmas bonus!
Now you have maximized your annual contribution and received the full 5% match every month of the year.
You can change your contribution election on myPay for Navy, Air Force, and Army.
For example I am an O-4 with over 10 years of service. So I will elect to contribute 22% of my pay, based on the above chart. That means I will contribute 22% of my $7460 base pay every month to the TSP = $1641.2.
For the 11 months up to November, that's $18,053.2, leaving me $1446.8 ($19,500 limit – $18,053.2 contributed) to contribute in December. I will receive an extra $195 in my paycheck.
Because $1150.74 / $6241 is 18.4% of my base pay, I contribute at least 5% of my base pay in December and receive the full 5% match every month of 2019.
How much is the TSP match worth monthly?
How much is the BRS TSP match worth annually in 2020?
If you receive the full BRS match every month this year, it can be worth thousands of dollars depending on your pay grade and time in service. Compounded over a few years or decades, your TSP match can grow to tens of thousands of dollars.
This additional investment can provide you with substantial additional income after financial independence or retirement. Click the image for a larger picture.
I hope these charts are valuable to you. Please share on your social media and leave a comment below if you have any questions about Blended Retirement System, the Thrift Savings Plan, or how to get the most out of the new system.
2020 Military Pay Chart
Here is the military pay chart I based all my calculations off of.
Military TSP Match FAQ
The military automatically matches 1% of your basic pay into your military Thrift Savings Plan account. If you contribute at least 5% of your military pay to either the Roth or Traditional TSP, the military will contribute another 5% into your Traditional TSP. This can be worth $1000s every year.
Yes! Roth TSP is matched. The match, however, will go into your Traditional TSP account. When you open a TSP, you have 2 accounts inside the TSP: A Traditional account and a Roth account. You can contribute to either one and receive up a 5% match from your employer monthly. However, whether you contribute to Trad or Roth, the match ALWAYS goes into the Traditional account.
At a minimum you should put in 5% into your TSP. If you are enlisted or below the rank of O-4 (major, lieutenant commander), you should probably contribute the 5% to your Roth TSP. As your income grows, you should eventually contribute the maximum $19,500 per year to your military TSP account, while still ensuring you get the 5% match every year.
You can if the tax form or software asks you to report it. However you have already paid tax on this money before it goes into your Roth. Therefore, it does not lower your taxable income in that year.
To maximize your military TSP match you must contribute at least 5% of your pay every month from January to December. Therefore you do not want to max out your contribution earlier in the year. There is a chart on my site that will show you what percentage to contribute.
No, the standard TSP limit does not include matching. In 2020 you can contribute the full $19,500 and get matching on top of that, up to the “annual addition limit” of $57,000. The standard TSP limit is called the “elective deferral limit.”