WEBVTT

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You can never have too much of a good

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thing , right ? Well , if you plan on

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maxing out your thrift savings plan

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contributions , that might not be true .

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Believe it or not , it's entirely

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possible to save too much too quickly

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into your TSP and miss out on some free

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money . But before we get into that ,

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let's talk about what maxing out your

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TSP means . Picture your TSP as a piggy

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bank , a really big piggy bank . For

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active duty service members , it can

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accept up to $19,500 of your

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contributions in 2020 and even more in

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some situations . Guard and reserve

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members , the same limit generally

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applies , but it's across all your

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employer provided retirement plans

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combined . So back to the potential

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problem . If you plan to max out your

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TSP , which could be a great idea , it

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matters how you do it . Let's see why

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by looking at two slightly

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oversimplified examples involving

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service member Randy . Here are the

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facts for both examples . Randy wants

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to contribute the IRS maximum to her

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TSP this year . Her basic pay is $3800

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per month , and she receives a $19,500

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bonus in January . In our first example ,

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let's assume Randy decides to

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contribute her entire January bonus

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into her TSP immediately filling up her

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contribution piggy bank for the year .

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Here's the problem . BRS matching only

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applies to contributions made from

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basic pay , not special pays ,

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incentive pays , or bonuses . This

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means first , Randy won't receive any

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match on the $19,500 she put in , and

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second , since she won't be able to

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make any additional contributions for

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the rest of the year , she'll also miss

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out on matching contributions she could

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have received . As this table shows ,

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that's potentially over $1800 she won't

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get . And it could be even more if

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Randy got a pay increase during the

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year . Now let's look at another way

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Randy could accidentally miss out on

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free money . This time , let's assume

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that she decides to live off her bonus

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for the 1st 5 months of the year and

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contribute 100% of her basic pay to the

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TSP . Even though she is contributing

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100% , only 5% gets matched .

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This means she'll reach the

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contribution limit by June . But will

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only receive $780 in matching

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contributions , and she'll miss out on

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$1000 or even more if her pay increases

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after that . So let's recap .

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TSP matching only applies to basic pay

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and only up to 5% . If you invest too

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much too quickly , you could miss out

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on some of this free money . For more

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help on this topic , speak with a

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personal financial counselor at your

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installation .