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WWW.MHCE.US Monthly Newsletter | 19<br />
reason that you can't contribute during your last<br />
month of service. But whether I'm right or not,<br />
the fact is that you can't contribute. The Defense<br />
Finance and Accounting Service will suspend<br />
your TSP contributions automatically after the<br />
end-of-month paycheck for the month prior to<br />
your separation.<br />
So what does this mean for you as you plan your<br />
transition? Well, it means that you're going to<br />
have a bigger paycheck during that last month.<br />
That's a nice thing and can help increase your<br />
transition fund right before you need it.<br />
But it also means that you will miss that<br />
opportunity to make a contribution for that<br />
month. And, if you are in the Blended Retirement<br />
System, you won't receive government matching<br />
contributions for that last month. Depending<br />
on your overall financial plan, you may want<br />
to adjust your contributions for the months<br />
prior to separation so that you reach the desired<br />
contribution amount for the time you're serving.<br />
If you are planning to pursue work after leaving<br />
the military, you may want to consider how your<br />
military TSP contributions may impact your<br />
ability to contribute to your new employer's<br />
retirement plan. The total annual limit for<br />
contributions is combined between the military<br />
TSP and a civilian TSP account, or a private<br />
employer's 401(k) plan. This may be important<br />
if your new employer offers an employee match.<br />
While most of us don't know for sure what<br />
sort of benefits will come with post-military<br />
employment, it's a good idea at least to think<br />
about how things might unfold so that you're<br />
making informed decisions along the way. In the<br />
most extreme example, if you contribute a ton<br />
to TSP before separating, you may find yourself<br />
unable to contribute to an employer plan and you<br />
could miss out on their matching funds, which<br />
may be a large part of their retirement package.<br />
If that entire last paragraph is making your head<br />
spin, consider meeting with a fee-only financial<br />
adviser who understands military pay and<br />
benefits.<br />
There's no single right way to handle the curtailing<br />
of TSP contributions before leaving the military,<br />
but understanding that it will happen is the first<br />
step in making sure that you're using your money<br />
in exactly the way that you want to use it. And<br />
congratulations on your new phase of life!
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