Can someone explain TSP to me please?

Asking great questions. I wish I had gotten into it when I was a young soldier, but like you no one explained it to me. It's a type of 401k. I highly suggest getting with your base ACS finance counselor. There's a lot of benefits to the TSP that other investment opportunities don't have, but I don't want to give you dated or possible false information. Keep asking until you find someone that can explain it.

Go to this website. There is a number at the bottom for if you have questions. No better answers will come your way than from the SMEs

https://www.tsp.gov/

Essentially it is your private and self directed retirement account. I suggest you invest in it for two reasons, it is a vehicle to build wealth for retirement, and when you invest; the government will match or add to your contributions to TSP. Consider that free money that you don't want to throw away.

There are various funds in TSP that you can invest in. You are not relegated to one fund. You can spread your investments over various funds. The funds have different focuses. Some will invest in stocks (stocks is proof of partial ownership of a corporation) or bonds (essentially an entity borrows money and pays it off with interest) like government bonds.

The litmus test of a funds performance is comparing it to an index fund like the S&P 500 which is comprised of the 500 largest corporations in the US. An index fund is a good indicator of the performance of the stock market as a whole. Let us say the S&P 500 yielded an average of 12% over 10 years and the stock fund you want to invest in has yielded on average 7% over the same period of time, that stock fund has underperformed, and you should find a fund that has performed better.

One fundamental in investing is the risk/reward relationship. The investment vehicle like government bonds have no risk, but its yield will be very low. The stock market has a higher risk, but over the long-term it will yield more. Risk is defined by the volatility of an investment as it goes up and down. The stock market has more volatility than bonds, but over the long-term you can ride the ups and downs and the long-term trajectory is upward. The key is long-term investing to ride the ups and downs.

If you go Roth, you will pay taxes on your invested amounts now and pay no taxes when you retire and start withdrawing. If you go Traditional you get a tax break now and will pay taxes when you retire and start withdrawing. Let's assume you invest $6000 in one year.

Roth: You invest $6000. Don't pay taxes when you withdraw.

Traditional: You invest $6000 and you are in the 20% tax bracket. The IRS will say that the $6000 is non taxable and you don't have to pay $1200 taxes on it. It is essentially like the IRS gives you back the $1200. You pay taxes at the end when you withdraw.

I will be around if you have more questions.