CHARLESTON AIR FORCE BASE, S.C. –
Congratulations, you've been promoted and have an extra $100 per month coming to you. You celebrate by:
a) Heading to the car dealership and trading up.
b) Increasing your retirement account allotment.
c) Setting up a savings account.
d) Paying extra on your credit card debt.
e) I'm going to Disneyland!
If you answered "d," do yourself a favor and head to the Airman and Family Readiness Flight where a financial counselor can offer you a personal financial evaluation and help create a plan for getting out of debt.
If you answered "a" or "e," congratulations on already maxing out your Thrift Savings Plan contribution with being fully invested in your Individual Retirement Account and having won the lottery last month.
If you answered "b" or "c," you can probably test out of this article, but hey, scan through it anyway.
As a squadron commander, I'm not a professional financial advisor, but I've seen too many cases of people so focused on the here-and-now and "keeping up with the Joneses" that they give short shrift to their future. The TAP seminar is not the time to start thinking about your retirement finances.
The good news is that the Air Force has programs in place to help you on your way to financial success:
A&FRF counseling: Experts can provide financial counseling and workshops, as well as offer individual assistance with budgeting, debt reduction, the Uniformed Thrift Savings Plan and investing just to name a few. Call 963-4406 to make an appointment.
Paycheck allotments: You probably don't know how much income tax you paid last year because it's automatically deducted from your check. Head over to the finance office and set up an investment or savings allotment so you pay yourself -- your retirement, education or vacation account -- without the temptation to spend it on something in the mall.
TSP: TSP offers federal employees the same type of savings and tax benefits that many private corporations offer their employees under "401K" plans. When you participate in the TSP, you make before-tax contributions. That means the money you contribute comes out of your pay before income taxes are withheld. Therefore, the amount used to calculate your taxes is smaller and you pay less in taxes now.
Additionally, you do not pay income taxes on contributions and earnings in your TSP account until you are eligible to receive the money, (between the age of 59-and-a-half and 70) when your tax bracket may be lower.
As a result of the combat zone tax exclusion, your contributions during the deployment are tax exempt and will remain tax exempt even when you withdraw that money, but remember you cannot withdraw the money without penalties until you are 59-and-a-half years old. The earnings, however, on tax-exempt dollars are not tax exempt.
Signing up for TSP is easy and can be done through My-Pay. To find out more about TSP, visit www.tsp.gov.
In the military or as civilians, all of us have the opportunity to save for retirement in a tax-advantaged IRA. While you are under the age of 70-and-a-half, you may set up a traditional IRA and deduct from taxes for all or part of your contribution depending on your income level. You can also choose to make an annual contribution to a Roth IRA, which is not tax-deductible but allows investment earnings to accumulate tax-free. You pay no income tax when you take distributions from a Roth IRA during retirement. You can contribute up to $4,000 to IRAs this year; $5,000 in 2008.
When you get that promotion or extra cash from a deployment, go ahead ... live a little --take your spouse out for a nice dinner -- but have a plan to put that money to work for you.
So, who's investing in your future? Hopefully you are!