Thursday of Military Saves Week 2013 is Saving for Retirement day. If you’ve spent any time around The Paycheck Chronicles, you’ll know that I am a huge believer in planning for retirement. I am looking forward to having the freedom to stop working. Savings is a big part of any retirement planning, but how should you save?
Military members have a tremendous opportunity in the Thrift Savings Plan (TSP). I think TSP is great – it is easy, it is cheap, and it gives you many investment options. TSP contributions are deducted from your military pay before it even hits your bank account, so you don’t even have to see the money. Plus, it is all handled by the TSP board, so your only decision is which fund to choose.
In addition to TSP, Individual Retirement Arrangements (IRAs) provide everyone with another opportunity to save retirement funds in a tax-advantaged account. I particularly encourage military spouses, who may not have other retirement accounts available, to contribute to IRA accounts every year. I prefer the Roth IRAs, and practically insist that you contribute to one when you are in a tax-exempt combat zone.
As my husband gets closer and closer to retirement, I’ve become more concerned with maxing out our savings. We won’t be able to contribute to TSP once he retires, so we’ve only a few short years to put as much money as possible into that account. I think we’re on track to put in the maximum contribution this year, barring any surprises. I wish I could go back and tell my younger self to save more. That’s not really possible, so I’m telling you instead.
Tax-advantaged retirement savings are important for anyone who ever plans to stop working. Military Saves suggests a goal of increasing your retirement savings by 1% of your income in 2013. 1% is a great start, but I encourage you to get more aggressive. See if you can’t boost your savings by 2-3%, even 5%. Each little boost will add up and you’ll see your savings really grow.
Action Step: Increase your TSP or IRA savings by at least 1%. More is better. Let us know in the comments, so we can be excited with you.