Their Retirement Strategy: Never Stop Saving

The story about the 2008 financial crisis is familiar enough: By the time the market bottomed out, the S&P 500 losing more than 50% of its value, millions of Americans, including Phillip Thompson, panicked about their retirement savings. Luckily, Tanja Thompson, his wife, was there to ease his nerves.

“I told him to calm down,” says Tanja, a mediation counselor employed by the Department of Agriculture. “We knew we were in it for the long haul," she says. "We never closed any accounts.”

The Thompsons, both 53, hadn’t met a financial challenge quite like the 2008 bear market ever before. But thanks to their myriad retirement vehicles, savings cushion, and nerve, they were able to withstand the headwinds.

The couple’s retirement planning began more than 20 years ago, when Phillip was in the Marines and Tanja served in the Air Force.

While in the Marines, Phillip saved via the Civil Service Retirement System (replaced later by the Federal Employees Retirement System).

In 1990, Phillip left the military and started his own law firm. With civilian life came a civilian retirement account: a SEP-IRA. For a self-employed person, SEP-IRA contributions are generally tax-deductible and investment earnings grow tax deferred. Business owners like Phillip can annually contribute as much as 25% of their income, up to $52,000.

While Phillip spent the 1990s working on behalf of different Native American tribes, Tanja was in the Air Force, saving in a military Thrift Savings Account. A TSP—a retirement savings account for employees of the federal government—is the equivalent of the 401(k) in the civilian world.

Just before the 2008 financial crisis, Tanja left the Air Force and took a job with a civilian defense contractor, where she opened up a 401(k).

Not long afterward, she took a civilian job with the federal government. She started saving in a new TSP account, into which she rolled over her old military account. She now saves $24,000 a year in her TSP—the usual $18,000 limit plus a $6,000 catch-up contribution. The current balance is $180,000.

While the Thompsons, who live in Leesburg, Va., haven't given up on saving for retirement, they’ve struggled with more than just rollercoaster investments: Tanja is a two-time breast cancer survivor, and the couple's son, Tysen, underwent a liver and kidney transplant in 2014.

The Thompsons have had some help building their now-$495,000 nest egg along the way: They work with a financial adviser who helps guide them toward a comfortable retirement.

That's an effort based on their nonstop savings. “I’m glad we’re making the sacrifice now,” says Tanja. “We know we need to do it to have the lifestyle we want after retirement.”