Heather,

I am a Marine and plan on pursuing IBR while investing in the thrift savings plan (TSP) that the Marine Corps has to offer. Information about the TSP can be found here: http://www.marinecorpstimes.com/benefits/pay/online_hbml10_allow_tsp/

I was wondering, if I invest money in the TSP, will my annual income for IBR purposes be lowered by the amount of my TSP investment? I was thinking the answer was yes, since the money invested in the TSP reduces the amount of my income subject to tax. For example, if I have base salary of $44,000 and invest $16,000 into the TSP, can I utilize the IBR figures for an income of $28,000?

Thank you very much for your time.

Ooo rah, Devil Dog.

Yes, the Thrift Savings Plan is similar to a Traditional IRA in that you can make pre-tax contributions, and the earnings you deposit will not be taxed until the money is withdrawn at retirement age. You are exactly right that that means that your AGI is lower so your IBR payment is lower.  My understanding is that the maximum annual TSP contribution limit is set at $16,500 for 2011.

I also found some fancy rules that you should check out, that provide additional benefits for military members in certain deployed situations here: http://themilitarywallet.com/tsp-or-ira/