By Jeremy Henderson, Army Flier Staff WriterJanuary 22, 2015
FORT RUCKER, Ala. (January 22, 2015) -- The New Year marked an important change to the Thrift Savings Plan and deductions could halt for Soldiers unless they log in before Jan. 31.
The Jan. 1 change to myPay requires Soldiers to designate their Roth contributions as a percentage instead of a dollar amount. If they do not log into myPay to comply with the change, the Defense Finance and Accounting Service will not be able to process Roth contributions. Traditional contributions are not affected by the change, since they are already designated as a percentage.
Mike Kozlowski, ACS employment readiness manager, said the change will be a new experience for Soldiers designated TSP contributions.
"In the past, Roth contributions by military service members were designated as actual monetary amounts to be sent to their respective TSP accounts via a myPay request," he said.
According to DFAS, the latest change in designating Roth TSP contributions as pay percentages " . . . is due to pay system improvements that will more fully automate processing and provide better customer service…" to service members.
"For Soldiers, this major procedural change will allow them to designate specific Roth TSP contribution elections by way of their base pay, incentive pay, special pay and bonus pay amounts -- which is a huge departure from the current method of designating a specific dollar amount that includes an individual's combined pay elections (basic pay, incentive pay and special pay; and a separate dollar amount election for bonuses)," Kozlowski added.
According to Kozlowski, Soldiers should act now to ensure contributions continue after the Jan. 31 deadline to designate deduction percentages.
"Otherwise, those contributions will stop after January," he said. "I'm a big fan of a disciplined 'outta sight, outta mind' approach to retirement planning. The TSP is a vital component in a Soldier's retirement savings strategy. As such, having Roth contributions set up by way of a pay allotment is the way to keep dollars flowing into your retirement fund 'gas tank.'
"Practically speaking, this means that you learn to live on a discretionary income while taking comfort in the fact that your retirement plan is being funded and managed for you on 'autopilot,'" he added. "These Roth TSP contribution dollars fuel the various TSP index funds you've selected to keep your retirement savings running at a pace that mirrors your risk tolerance. Disrupting that flow could reduce the amount available for withdrawal when you reach retirement age (59 ? years of age at the earliest) and could have an adverse impact on your hoped-for retirement lifestyle."
Kozlowski said it can be tricky to determine what percentage accurately represents a previous dollar amount.
"Calculating a percentage of your net pay for Roth contributions is not as easy as one may be led to believe," he said. "Many personal finance experts favor setting a goal of 15 percent for all of your retirement savings. This includes retirement plans/arrangements such as IRAs, 401ks and other corporate qualified plans.
"The folks at the Thrift Savings Board understand the complexities in calculating this Roth TSP contribution percentage," he added. "That's why they have made available a handy worksheet for Roth contributions, along with a similar worksheet if you are making traditional TSP contributions (from your gross pay)."
The links to these worksheets are located at http://www.dfas.mil/militarymembers/tspformilitary/tspac.html.
Soldiers who have additional questions about the process of changed deductions from dollar amounts to percentages or about securing their financial future need only make a phone call, Kozlowski said.
"Don't hesitate to contact one of the financial counselors at ACS's Financial Readiness Program," he said. "You can schedule an appointment by going to our website and sending us an email requesting an appointment.
For more information, visit http://www.ftruckermwr.com/acs/financial-readiness-program/ or call 255-9631 or 255-2594.