Brenda S. McDaniel, Program Analyst, Personal Financial Readiness Program
(Military Community and Family Policy)
Maybe you picture long, sunny days spent fishing or gardening, spending more quality time with family and friends, or traveling to new places. Whatever your vision for your retirement, careful planning and disciplined saving can help make it a reality.
There are many paths to a comfortable and financially secure retirement, but whichever one you choose, the cardinal rule for retirement planning is to start early! Your retirement savings grow by compounding interest year after year. The earlier you start to save, the more time your money has to compound interest, and as the money in your account grows, its potential to earn even more interest on the increased amount grows as well.
Consider this example: a person who starts contributing $100 each month to a retirement account at age 20 and one who starts contributing $200 each month to an account with the same rate of return at age 40 will each have invested a total of $48,000 by the time they turn 60. But the one who started contributing earlier will have amassed a total of $351,428 compared to only $118,589 for the person who waited until age 40 to start contributing to his account!
Perhaps the most obvious retirement plan option for service members is the government-sponsored Thrift Savings Plan (TSP), similar to a private-sector 401(k). The TSP allows you to contribute a percentage of your pay (tax-deferred) to a retirement account that accumulates earnings over time. You have the option of contributing a percentage of your basic pay, incentive pay, or bonuses to the TSP, but to contribute any of your incentive pay or bonuses you must also contribute a portion of your basic pay.
Service members who want to enroll in the program may do so at the TSP website, where you’ll also find additional information about the plan and tools to help you figure out which TSP fund is right for you, how much you can contribute, how much your savings will grow, and more.
Since you have access to a great retirement plan like TSP, be sure to make the most of it! The more you’re able to contribute to the plan now, the more time your money will have to compound interest and grow. If you aren’t contributing enough now to allow for a financially secure retirement, consider how you can cut your living expenses and redirect the savings to your TSP account or other savings or investment accounts.
Have you started saving for your retirement? Join the discussion and share your retirement savings ideas. The best retirement strategy is one that puts time on your side. Remember that the sooner you start saving, the easier it will be for you to build a retirement account that keeps you financially secure and enjoying life long after you stop working.