October 29, 2013
Defense Media Activity
During these times of economic uncertainty, it’s easy to put off saving for the future when the cost of living seems to demand ever more of your hard-earned paycheck. Throw in an unexpected government shutdown and let’s face it: money gets tight and normal savings plans are waylaid.
It’s important during these moments to continue to contribute to a retirement savings plan, even if your contribution is a fraction of what it normally is. While it’s unclear what the future will bring, reaching retirement age is a certainty we all need to be ready for and it’s important that we have the financial means to cover our living expenses when we get there.
Barbara Thompson, the Defense Department’s Office of Family Policy, Children and Youth director, can’t stress enough the importance of planning for your retirement. “Everybody has to know that savings for their retirement is critical for their financial well-being. Sometimes you have to start small because that’s what you can afford but the goal is you eventually build-up so that you’re saving more and more every year.”
She encourages people to start saving young and take advantage of compound interest that builds up over time. “When we’re 18, 19, 20, we’re not thinking about retirement but it creeps up very quickly and i think that’s really important; it’s not the ‘now,’ it’s the future you need to be thinking of.”
Thompson recommends utilizing a Thrift Savings Plan to get your retirement savings started. “What we have are two forms of TSP; TSP where you tax-defer your savings until a later date [when you can] start taking them out and then you pay taxes on that savings. Then, there’s the Roth TSP where you pay up front the taxes, so that by the time you take them out the taxes have already been paid. [It] would be an individual decision to figure out which one is better for your particular circumstances.”
She also points out that the Defense Department offers resources to help you decide which plan is best for you and to help you get everything on track. She strongly suggests that you utilize the financial resources that the DoD provides such as Military OneSource financial counselors, personal financial managers located in family centers on military installations and installation banks and credit unions. Military OneSource also offers online calculators that help you determine how your contributions will develop over time as they gain interest.
“We’re seeing that people are living longer and longer, so you want to make sure that you have enough capacity in your retirement account to cover you during those years,” Thompson said. “As the baby boomers are reaching that retirement age and tapping into social security we’re seeing the expenses that they have, you know, especially if they go into assisted living or have some long term care issues. It’s expensive and those are things that you want to make sure are covered.”
As you continue to progress in your life and develop your own spending plan, she recommends keeping your retirement nest egg at the forefront of your financial priorities and asking yourself two very important questions before making any purchases: “Do I want this or do I need this? And, if I only want this, can I take [this] money and put it away into a savings account?”