TSP Real Talk (Part 3)

The Blended Retirement System (BRS) is the military’s 3-pronged approach at ensuring you have something to show for when you retire, whether that’s after a twenty or four year career. Most people are aware of the former retirement system that basically only provided a pension if you completed 20 years of service. For active duty folks, they collected immediately, and for Reserve and Guard members, they collected their pension at about 60 years old. The pension amount equated to about half of one’s average base salary years (for active duty). That’s it. If a member put money into a TSP account, they didn’t get matching. Under the new BRS, which became a thing in 2018, members have three components to consider:

1. Pension multiplier is 2% (legacy system was 2.5%).
2. Continuation pay (which I hate the name of because I think it’s really a retention bonus and has almost nothing to do with retirement unless you take all that money and put it in an individual retirement account…that’s right an IRA, not TSP. If you max out your TSP with your continuation pay, you can no longer make individual contributions, ergo, no government matching. Speaking of matching……).
3. TSP government matching. Everyone gets an automatic 1% even if you don’t contribute. The government will match up to 4% of what you contribute, for a total of 5%. You only need to stay in the military for two years in order to keep the matching money.

TSP matching is definitely the shiny new penny under BRS, because missing out on that half percent in the multiplier draws down the pension amount from 50% of base pay to about 40% (active duty). That’s a drag, for sure. But the TSP matching idea sort of makes up for it, if you know what you’re doing. 

First, you need to actually contribute to the Thrift Savings Plan if you want to get anything out of it. The 1% isn’t going to take you very far, but four, five, and ten percent certainly will under the power of compound interest. You are more than welcome to contribute more than 5% of your base pay, but the government will only give you 5%. It’s very unlikely that you would max out your TSP, so no need to worry about that if you’re just starting out or even in your mid-career. As I mentioned in the TSP Real Talk (Part 2), I’m clearly a fan of you (and me!) putting contributions in a Roth account. But what about the government matching? Where does that go? Great question!

As of the end of 2025, all government contributions go to a traditional account. You can decide if those funds go in a lifecycle or specified fund account (see TSP: Real Talk (Part 1)). If you wanted to move your traditional money into a Roth account, it would have to be done through an external Roth account (called “backdoor Roth”). It’s doable, but somewhat painful (I know, I did it once). But starting in January 2026, TSP participants can move their traditional TSP money, to include government matching funds, to a TSP Roth account. It’s very exciting to have this easy option! Why…you might ask? Here are a few reasons:

1. The funds transferred from a traditional to Roth account don’t count against the $7,000 annual maximum amount you can contribute if you just directed those funds directly from your paycheck.
2. See TSP Real Talk (Part 2) for all the benefits of using a Roth account….allows for tax-free growth, no RMDs, and allows for tax-free withdrawals. 
3. Maybe you didn’t know the benefits of a Roth account and you not only want to move your government matching dollars, but you want to move your original traditional funds, too. This is a mechanism to do so.
4. You make too much money to contribute directly to a Roth (looking at you full bird colonels and generals), so this legally provides a mechanism to do so.

But tread lightly! You must heed the warnings! Here are a few:

1. Since the contributions are moving from a non-taxed account (traditional) to a taxed account (Roth), you must be prepared to pay taxes on it come tax season! You can’t use money from the moved funds to pay for the taxes. So, if you plan to move $20,000, be prepared to add that to your taxable income (this applies to both the principle and earnings).
2. You may consider skipping this option if you are close to retirement due to having to pay taxes. This might be a great option if you are in a lower tax bracket now (but again, you need to have the cash on hand to pony up to the IRS).
3. When in doubt, see a tax advisor! I’m NOT that person.

Even if this isn’t for you, I really appreciate that TSP is making this an option. Government matching is a great benefit, and now, this is icing on the cake (for some people).

TSP calls this “Roth in-plan conversions” and more information can be found here: https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/

Either way, you get to take the benefits of TSP with you when you leave the military, even if you don’t reach 20 years of service.