HPSP and Retirement

[DynamicDental]

Is it possible to take advantage of military retirement benefits such as the Thrift Savings Plan (TSP) or any other program I have not heard about, by using the HPSP stipend?

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[USArmyHPSP]

Is it possible to take advantage of military retirement benefits such as the Thrift Savings Plan (TSP) or any other program I have not heard about, by using the HPSP stipend?

Seems like an easy question. Here is the hard answer.

Stipend is not pay, it is a taxable scholarship entitlement intended to cover EDUCATIONAL expenses not covered by contract, like a laptop. While nobody checks to see what the stipend is spent on, that is the INTENT. The only pay you receive is when you are doing the 45 day ADT. To date, the Finance computer system is set up to deduct a set amount of PAY bi-weekly to be attributed to your retirement account. They CURRENTLY have no system to turn the allotment on for 45 days, and they turn it off until the next time you are on active duty. So, they can't set up an allotment based on stipend not being pay, and they can't deduct an allotment while you are in a pay/active duty status. That has been their story for as long as I've been here.

Enter the Blended Retirement System. I have heard through the grapevine that the practice of allowing the HPSP students to not have to choose between the Blended and static system until after graduation is being looked at very hard. Policy makers and JAG are involved. They (big Army) has told DFAS that they have to "figure it out" so that HPSP students will be able to choose the system they want and to set up an allotment toward that retirement system. I just heard this in the last two weeks. And, I have no idea if or when this can actually happen. And, if may or may not be Army specific.

Now, comes the tricky part. The Finance Office (DFAS). The "D" in DFAS stands for DEFENSE ultimately work for the Department of Defense and not the individual Service (Army, Air Force, Navy). We, the Services, can ask for stuff, but ultimately, they don't work for us. Rather than fix the antiquated computer system, in the past they have chosen to come up with a work-around. Think in terms of your accession bonus. The computer system does not allow for a one-time payment of anything over $9,000.00 but rather than fix the system, they came up with just paying out the 20K in three payments. This time it's more tricky, and if they do come up with a work-around, I'm afraid that everyone is going to be at the mercy of a handful of very low level government workers and all that that entails. How many of you have not received your ADT pay while on ADT, then receive it, but have the amount that you were paid in stipend for the ADT time shows up as a debt to the government? How many of you have had to wait an exceedingly long time for your bonus? Who is to blame for these instances? The very same low level GS employees at DFAS.

All of this to say that right now, today, if you want to contribute to a retirement fund, you may want to think about something outside of the Armed Services.

 

[Incis0r]

I save part of my ADT pay in a Roth IRA.

Tax-wise it makes sense: pay your taxes on the extremely low income now, enjoy tax free growth and interest.

Also very flexible - can pull out your contributions without penalty if needed.

No need to worry about the TSP either this way.