Here’s How You Should Be Using Your TSP

Just Do These Things

The TSP is one of the biggest hookups the military is giving you financially. What blows my mind is how a lot of people still don’t take advantage of it. Ignorance is bliss being broke I guess.

The cool thing about the TSP is you don’t need to actually give a shit about personal finance to maximize the amount of money you make. Literally, take the 5 minutes to do these things:

  • Log onto mypay (be an adult and don’t make excuses about not having a CAC reader: you can also sign in with a username and password)
  • Go to TSP >Edit in bottom right corner and set it to the highest percentage of your base pay that you can afford (no less than 5%, ideally 15-20%)
  • Go to and set your contributions 100% to a lifecycle fund-if you’re not sure what date to pick; choose one when you’ll be old as hell (like over 60)
  • Congrats you will make a ton of tax free money

Quick Facts About the TSP

When can you access your money? If you are no longer working for the government you can begin to withdraw at 55. Otherwise, you can withdraw at 59.5 years of age. There are exceptions (such as divorce or medical bills over 7.5% of your annual income) that allow you to withdraw earlier. Otherwise, if you withdraw early you will have to pay income taxes and a penalty on any money you withdraw.

How much can you contribute to the TSP? The max contribution is $19,500 annually which breaks down to $1625/ month. This amount is from your contribution only and does not include money given as a match.

You can literally stop reading this article now and you’ll be on the road to success. Or you can keep reading to see why I said these things. More importantly, let’s discuss all the cool shit the military will give you for free.

Things The Military Will Give You for Free

  • Shots (like all the shots)
  • Friends (unless you suck)
  • Early Morning Wakeups for no reason
  • Stupid shit you don’t want (No, bringing a ruck sack hiking is not cool.)
  • Tons of Free Money

Let me guess, your greedy ass is wondering about that last one. Yeah, the military matches your TSP up to 5% of your base pay. The only requirement is that you contribute at least 5% of your base pay to TSP to be eligible. Even better, is that the money is going into your retirement account. This means they are buying investments for you that will grow into much more money down the road. In fact, every dollar invested at the age of 25 will grow to be $45.26 by the time you are 65. This assumes a 10% rate of return which is the historical average for the S&P 500. A quick example using a O1 2021 Salary:

Time in service: 2 years

Base salary: $3,525

Saves 15% of their base pay: $ 528.75/month

TSP Match: $ 176.25/month

Total Monthly Contribution: $705.00

Total Annual Contribution: $8460.00

Some of those dollars aren’t even coming from you, the military is contributing them for free. Either way they will grow to be a huge amount by the time you retire. Wouldn’t it be great if you didn’t have to pay taxes on that huge amount?


If you joined after January 1st, 2018 the military will only match 1% of your pay for the first 24 months of service. After that it will match up to 5% as long as you contribute at least 5%. If you contribute less, they will match whatever amount you contribute. The military no longer contributes to your TSP when you are not receiving pay from the military.

How to Not Pay Taxes on That Huge Amount of Money in Your Retirement Account

By selecting a Roth account you will pay taxes on money you put into that retirement account because it is still considered income for this year. Once it goes into the Roth account though you will never pay taxes again no matter how large the amount becomes. The other option is a Traditional Retirement account. Your contribution can reduce your taxes this year but will be taxed when you pull it out. A quick example to demonstrate:

You’re 25 and you save $10,000 on a given year to your traditional retirement account. You make $65,000 in taxable income.

Subtracting that $10,000 from your taxes will get you about $2200 in a tax refund that given year BUT when you go to withdraw that money in the future, that would cost you $26,880 in taxes. How is that?

If your TSP grows at the market average of 10% for 45 years, the $10,000 will grow to be $136,700. When you choose a Traditional Account, you are choosing to pay taxes on the enormous amount of money that will be available when you withdraw it (in this example $136,700). This money is counted as income when you withdraw and so if you pull out the $136,700 in the future it will be taxed as that amount of income.

Go with Roth and save yourself from the large tax bill. The money you save will grow exponentially. If you choose traditional then that huge ass number in your retirement account gets taxed as ordinary income. That’s a lot of wasted money.

Money Gouge Tip

Your money won’t grow if you don’t invest it. There’s no point to saving money for retirement if you’re not going to invest it. Unfortunately, the TSP defaults to G fund which essentially earns nothing. If you’ve never logged on to the TSP website and managed your settings, your money is in a default G account. Be sure to follow the second step from above and change your settings to actually earn money.

It’s that easy. This is why the TSP is so great. You don’t need to work on wall street to capture the gains of the market without paying taxes. Like everything else, you get out what you put in. By putting away as much as you can it will turn it into a life changing number later on. You want to be the person who made 10% on $100,000 in a year; but to get there you need to start with your next paycheck and stay the course.

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