The Uniformed Services' Thrift Savings Plan and Military Retirement Compensation package options

Abstract

Military service members are a diverse population, and have numerous different financial situations and needs. While the current total military retirement compensation package is by many accounts fair, adding flexibility and value to the system would benefit both the military and individuals. This report surveys the total military retirement compensation package, and then focuses on one component of the system: the Uniformed Services' Thrift Savings Plan (TSP). As a point of comparison, three other tax-sheltered retirement plans [the private-sector 401(k), the non-profit 403(b), and the Individual Retirement Account] and the two retirement compensation packages for federal civilian workers (the Civil Service Retirement System and the Federal Employees Retirement System) are examined. Potential TSP-focused changes to the total military compensation package are then analyzed, with quantitative financial tools such as Present Value Analysis, and recommendations made concerning these options. By adding flexibility to the TSP, military service members will enjoy a greater ability to tailor their post-service income to their individual situation and needs, and the military will simultaneously realize benefits in recruitment and retention, potentially at no additional monetary liability.