Many military retirees and veterans with a 100% disability rating can expect a major change as a result of a new bill, called the FORWARD Act. Should this be passed, it would allow for members to continue contributing to their Thrift Savings Plan (TSP) even after they leave service.
As it stands, if you retire or leave the military, you cannot contribute more money towards your TSP. Yes, you can keep what’s there, but you won’t be allowed to contribute anymore. As a result of this, many veterans are forced to open a new retirement account and start investing. With that being said, the FORWARD Act aims to fix this
Why the Change Matters
Simply put, the TSP is the government version of a 401(k) savings. There many service members who rely on it for their retirement savings.
But here’s the problem: the day you retire or decide to come out of service, you lose the ability to keep contributing. For someone who has built up years of savings in the TSP, it feels like hitting a wall.
The new bill would let two groups continue contributing:
- Military retirees who receive retirement pay
- Veterans with a 100% disability rating who receive VA compensation
Instead of having to start over in a new investment account, they’d be able to direct part of their retirement pay or disability benefits straight into their TSP.
What the Bill Would Do
Here’s what the FORWARD Act proposes:
- Keep your same account: Eligible veterans can keep adding money to the TSP they already have.
- Where the money comes from: Contributions would come from military retirement pay or VA disability compensation.
- No government match: There would be no extra government matching contributions, in contrast to active-duty service.
- Timeline: If approved, the Federal Retirement Thrift Investment Board, the Department of Veterans Affairs, and the Department of Defence would have six months to establish the procedures and regulations.
This doesn’t create a brand-new retirement system, it simply allows veterans to keep using the one they already know and trust.
Why It’s Fair
There are supporters of this bill who note that veterans have served the country and deserve to build on savings that they worked so hard for. The average veteran retires in their early 40s and they still have many years to continue saving and investing. It does not sound fair to force to start from scratch and create new savings accounts.
What It Means for Veterans
If this bill passes, veterans and retirees would gain:
- Continuity: Keep on contributing towards an existing retirement savings plan and not start over.
- Simplicity: Easy to manage the existing account as they are familiar with it.
- Security: Veterans may have 20, 30, or even 40 years to continue saving their money due to early retirement ages.
Veterans were also very happy and showed their support online, noting that they would be happy to continue contributing as long as they are given the chance to. This is seen as an opportunity to build on wealth at a steady pace.
What Happens Next
The bill is currently sitting in the House Committee on Oversight and Government Reform. There isn’t a hearing that is scheduled yet; however, it has received a lot of support from government officials and Republicans.
If it becomes law, veterans could see the changes within 180 days.
Bottom Line
For those who served, the FORWARD Act may be a straightforward yet significant reform. Rather than being disconnected from the TSP upon retirement, disabled veterans and military retirees would continue to accumulate the savings they began while serving.