MILITARY UPDATE
Benefits of military Thrift Savings Plan cited
Military Update focuses on issues affecting pay, benefits and lifestyle of active and retired servicepeople. Its author, Tom Philpott, is a Virginia-based syndicated columnist and freelance writer. He has covered military issues for almost 25 years, including six years as editor of Navy Times. For 17 years he worked as a writer and senior editor for Army Times Publishing Co. Philpott, 49, enlisted in the U.S. Coast Guard in 1973 and served as an information officer from 1974-77.
By Tom Philpott
With the war on terrorism pushing an already strained military into overdrive, personnel officials are concerned that service members are too busy to understand recent pay gains, and use them to ease into a new military Thrift Savings Plan.
"Right now it's a little frustrating," said Vice Adm. Norbert Ryan, chief of naval personnel. "We've got the busiest force we've had in a long time. Do they even have time to think about themselves and their finances?"
The initial "open season" to enroll in military TSP began last October and will end Jan. 31. The next open season will run from May 15 through July 31. Ryan hopes to have more than 10 percent of the Navy — 40,000 active duty sailors and reservists — signed up by the end of this month.
Almost every service member, he said, should elect to divert at least one percent of basic pay into a tax-deferred TSP to start saving for their future.
"We all know the power of compounding if you start early," Ryan said.
As of Jan. 9, less than 7 percent of active duty members and two percent of drilling reservists had TSP accounts.
TSP participants elect to make pre-tax contributions of 1 percent to 7 percent of basic pay. TSP payroll deductions begin this month. Once enrolled, participants also can contribute, and shelter from taxes, bonuses or special pay. But contributions per member in 2002 cannot exceed $11,000, the tax deferral ceiling enforced by the IRS.
The Navy led the services in lobbying for military participation in the TSP, which is very popular with federal civilian employees. The Navy now is encouraging sailors and Marines to participate. The program is open to all branches of service.
Ryan hopes to help the TSP enrollment effort by educating service members on the scope of recent pay improvements, including those that kick in this month.
A lot of sailors, he said, "are going to be surprised by their (January) paychecks."
Base pay is set to rise 5 to 10 percent, depending upon rank or pay grade. Housing allowances will jump by an average of 10 percent stateside but well above that average in expensive coastal cities — such as Honolulu — where the sea services are based.
When January pay gains are combined with $150 million in sea pay improvements made last October, the overall effect is impressive, Ryan said. This is particularly true for sailors on consecutive sea tours who qualify for a sea pay premium, family separation allowance, if married, and imminent danger pay for serving in hostile areas, which is where most aircraft carrier battle groups steam these days.
If sailors find such surprises in their next paychecks, Ryan said, they should "pay themselves first" by opening a TSP, where they can invest in five types of funds, from money market accounts and government securities to riskier stock index funds, the same TSP options available to federal civilians.
TSP enrollees can borrow against account balances for certain purposes, including buying a home or sending a child to college. They also can roll the money into another tax-deferred account, withdraw it early and face a tax penalty, or withdraw it in retirement and have each withdrawal taxed as ordinary income.
Military people still have a "world class" retirement plan if they serve 20 years, Ryan said. Yet a TSP can make them feel financially empowered sooner, Ryan said, as their savings build and investments grow, tax deferred.
Despite real progress improving military pay and benefits over the past several years, Ryan said more is needed, including more targeted raises.
"We're not trying to match (top) salaries on the outside," said Ryan. "We just want to pay our people enough (so) they recognize their service is valued, and they are not having to apologize to their families for the paychecks they bring home."
More information on military TSP is available on the Web.
Questions, comments and suggestions are welcome. Write to Military Update, P.O. Box 231111, Centreville, VA 20120-1111, or send e-mail to: milupdate@aol.com.
