Many of the goals of a modern society is to provide trails for people to use so that they can get ahead in life. In the United States of America, we as a society have made the military one of those roads to success. From VA loans to free college education, the military can serve as one of the simplest (though not necessarily the easiest) ways to reaching financial independence. One of the programs that the US military has offered our service members is an account known as a Roth thrift savings plan (TSP).
A TSP account can come in two forms, traditional or Roth, and both of these act as a retirement account for military service members. These accounts act similarly to IRAs that are available to the civilian world, but with one key difference. While you will want to discuss your finances with a designated CPA, the following generally holds true: A member of our armed forces can contribute to BOTH a Roth IRA and a Roth TSP. For people who are unfamiliar with retirement accounts, this means that if one of our soldiers devoted their entire retirement plan between these two accounts, they would pay ZERO in taxes to the federal government when they retired. These result can add to an extreme accumulation of wealth for the men and women who serve our country.
How someone in the military can save millions using a Roth thrift savings plan
For an example let’s say we have a young college couple who just graduated from OCS and are making the base salary of two 2nd lieutenants, which is $69,724.80. Our young 23 year old graduates decide that they want to research how to retire multimillionaires pulling six-figures tax free when they retire. By doing so they can pursue any hobbies they develop over the course of their lives, travel, and spend their time as they wish.
If this couple is able to save $20,000 a year, that is a small stretch, but it is doable if you know what you are doing, they will retire with tens of millions of dollars in their mid 60s. If this couple invests in companies like Disney, and they get a 10% annual rate of return, they will have $10,752,740. If the stocks and bonds they own are paying out 4%, they will be getting paid just short of $440,000 a year. That money will also be tax free. By being intelligent and using a Roth thrift savings plan in addition to a Roth IRA, this couple will be able to live out a golden retirement complete with trips to Disneyland with the grandkids, large charitable contributions to the causes they care about, and being free from financial stress. It all comes down to the choices you make in life. The military has made this option available for those who sacrifice a lot for our country. Even if you don’t take the full match, this is something that if you serve in our armed forces, you should try to take advantage of, you earned it.