What is the military Thrift Savings Plan (TSP)?

Posted on Feb 12, 2024 by Katie Carter

Specific military divorce information can be hard to come by – and, even worse, what you can find is often conflicting or confusing.  I’ve spent a lot of time lately writing about military divorce because I seem to keep meeting up with women who are confused about one part of military divorce or another.

I can’t help myself; I write a lot of these articles (and have, for the last 12+ years) to answer the real-life questions – often using the real-life words – that I get in my seminars or conversations with actual women facing divorce.  It’s a small thing I can do to try to make sure that women are getting the divorce information they need.

The military is a little more confusing than civilian divorce in some ways because there are things that feel pretty inconsistent – there’s the military 10 year myth, the way 20/20/20 status works, and the fact that military support guidelines are not binding in Virginia courts.

Military retirement can also be kind of confusing, especially since the switchover to the new blended retirement system.

The blended retirement system began in January 2019; everyone who enlisted or joined after that date was automatically placed on the new blended plan.  For people who enlisted or joined PRIOR to January 1, 2019, it could look different.  If you enlisted or joined twelve or fewer years BEFORE 2019, you could choose to participate in either the old or new system; if you were in for more than twelve years prior to 2019, you’d stay on the old system.

One of the big concerns for people who were within that twelve-year range was that the service member could elect to switch between the old system and the new system without notifying their spouse or asking for their approval – even though the retirement is a marital asset!  If you’re separating or divorcing a military service member and you fall within this range, that might be a question you’ll want to ask.

The old military pension system

Under the old system, retirement was fairly straightforward: after 20 years, you’d receive 50% of your high 36.  After 40 years, you could receive 100% of your high 36.

The new military blended retirement system

Under the new system, there’s a Thrift Savings Plan (TSP) matching component, plus you receive 40% of your high 36 after a 20 year career.

Because of the Thrift Savings Plan even a service member who left without staying the full 20 years would walk away with at least some retirement, provided he had chosen to contribute during his service.

Thrift Savings Plan (TSP)

The Thrift Savings Plan (or TSP) is essentially a military 401(k).  It’s an account that the service member can contribute towards.  Under the old system, there is no matching; under the new system, there is matching.

There are as many as six different types of TSPs, including a regular and a Roth, and even a war zone TSP.  It’s important to know if your partner is contributing to a TSP and, if so, what type.

The money in the TSP, just like the pension funds, are marital property in Virginia and are divisible in divorce.

Hopefully, you’ve both made these decisions together – and you’ve been contributing.  I can’t tell you how many military divorces I’ve done where the parties haven’t contributed to the TSP at all!  Though it’s difficult to compare the old and new systems against each other – because I do like that even a military service member who doesn’t serve 20 years can walk away with something – there’s no question that the new blended system requires the service member to do more to plan for retirement.  The pension is worth less and the responsibility for the service member to voluntarily set aside a percentage of his own earnings is greater.  The potential is there for the new blended retirement system to yield a better retirement benefit for the (by then) retired servicemember and his spouse (or ex-spouse), but that means that the service member has to commit to saving a portion of his earnings.

Most financial advisors would tell you that it’s silly to miss out on any employer matching program.  I’m no financial advisor, but I agree: if you know you’re going to get a match, AT LEAST contribute enough to get the match!  Otherwise, you’re just leaving free money on the table.  (Not to mention, with the way compounding interest works, that money can add up to being worth a LOT to you in retirement!)

If you’re getting divorced from your military spouse, make sure to ask for your marital share of BOTH the pension and the TSP, if he has contributed!  For more information or to request a free copy of our military divorce book for Virginia women, visit our website at hoflaw.com or give us a call at 757-425-5200.