Saving – With a Purpose

Saving money for retirement is always a smart idea — no matter how far away retirement might be.

As a member of the military, you receive a regular paycheck, housing benefits and a possible signing bonus, so it’s important you save some of your money. But how?

First of all, understand why you’re saving. Simply “not spending” money that you’ve earned isn’t much of an incentive. So, set goals for the “future spending” of your money. Looking forward to a big purchase you can’t afford today will give your saving efforts a real purpose!

Start by paying yourself.

Civilians use their money to pay for housing, car payments, loans and utilities. Your situation may be vastly different, giving you an opportunity to put yourself in the front of the line — by paying yourself first, before you pay any other bills.

You can do this very easily, simply by participating in the Thrift Savings Plan. And it’s available only to you, members of the uniformed services and employees of the federal government. The TSP lets you place a portion (you decide how much) of your paycheck into an account where the money is invested for your retirement. And because the money is sent directly from your paycheck, you won’t even notice! It’s the easiest way to save!

And the best part about participating in the TSP? Uncle Sam puts money into your account for you! Yes! That’s free money — up to 5 percent of your basic pay. So, saving for retirement in the TSP is like getting a pay increase, thanks to the extra savings the government gives you!

Don’t procrastinate.

Sometimes, young members of the military think they can ignore retirement for now. After all, it’s decades away! There’s plenty of time to deal with it later, they believe.

They’re wrong. Procrastination, in fact, is the most common cause of financial failure. And here’s why …

Consider the story of siblings Jack and Jill.

You know that Jack and Jill went up the hill, but I bet you don’t know what really happened next. After high school, Jack, at age 18, went into the military and contributed $5,000 from his pay to the TSP each year. He stopped contributing after eight years — at the age of 26, having invested a total of $40,000.

Meanwhile, Jill went on to college and then to grad school. When she became a federal employee at age 26, she started contributing $5,000 to her TSP account. She also put her money into the same investments as Jack did and did so for the next 40 years. Thus, by the time she reached age 65, she had invested a total of $200,000.

Assuming Jack and Jill each earned a 10 percent annual return, who’s TSP account was worth more money at age 65?

Even though Jack contributed to the TSP for just eight years, compared to 40 years for Jill, Jack wins. Jill accumulated $2,212,963, while Jack collected $2,587,899 — a whopping $374,936 more than Jill!

How could this happen? It’s because Jack started saving sooner! Time is a precious resource when it comes to saving. Don’t waste it. Join the TSP today!

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