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TSP / 401k
- Thread starter dwitt
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I asked the same question when I first got commissioned. The only common piece of advice I gotwas , "Not the greatest of programs (as far as earning potential) but good overall. Do not start it until after you are maxing out your Roth IRA." Take this for what you will, but like I said, it was the only commnon ground from the many I asked about the program.
One of the main advantages of a 401(k) is when the employer matches some portion of the employees contributions (it's almost like an instant return on investment). You normally have fewer options with a 401(k) than an IRA, but the matching funds will offset the limited number of funds you can invest in.
TSP is similar to a 401(k), but as dwitt mentioned, there are no matching funds for the military.
Another benefit of TSP and 401(k) is the ability to have money taken from your check (pre-tax) and sent to the account. This is helpful for undisciplined savers and lowers current taxes (both plans have limits).
IRAs have more options (meaning there are more funds to chose from). Standard IRAs are pre-tax (like TSP and 401(k)). Roth IRA allow you to pay the tax now instead of when you withdraw the money. The benefit of paying the tax now is your earnings are also tax free.
It's hard for anyone to give blanket advice on what is best for any individual. Everyone's situation is a little different.
I like 401(k) for the matching funds. If funds are not matched I would rather go with an IRA. I'm neutral on he Roth vs. Standard. I think both have their own upside...
TSP is similar to a 401(k), but as dwitt mentioned, there are no matching funds for the military.
Another benefit of TSP and 401(k) is the ability to have money taken from your check (pre-tax) and sent to the account. This is helpful for undisciplined savers and lowers current taxes (both plans have limits).
IRAs have more options (meaning there are more funds to chose from). Standard IRAs are pre-tax (like TSP and 401(k)). Roth IRA allow you to pay the tax now instead of when you withdraw the money. The benefit of paying the tax now is your earnings are also tax free.
It's hard for anyone to give blanket advice on what is best for any individual. Everyone's situation is a little different.
I like 401(k) for the matching funds. If funds are not matched I would rather go with an IRA. I'm neutral on he Roth vs. Standard. I think both have their own upside...
First off, before you put $$ away into TSP, you need to be maxing out your IRA. Then invest in TSP. Main benefit for me in TSP is reducing my adjusted gross income (AGI) for my taxes, since that money is taken out before hand, and helps me at the end of the year. You are limited in your options where to invest, but I have made 37 and 21% on two of them over the last year, plus I have a total of 11 months of tax free $$ in the funds, so I won't get hit with any taxes when I pull the $$ out... It might not be the best program out there, but it is better than nothing, plus, I am going till retirement, so this is on top of the pension I already have.... food for thought.
quickandsure
Registered User
TSP, 401K, IRA, involve saving for retirement. TSP was recently expanded to include military, it authorized matching funds but do no think any of the services are in fact matching. For those matching fund programs, it is a no brainer, you gotta be in it, at least to the max matching.
I believe all should save at least 20-25% of the base gross income. TSP etc are very good if one does not have the discipline to save on their own. The programs take money directly and will not let you withdraw for such things as buying a car or new stereo. (Yes, I know ROTH IRA does, but in general)
My point it to get educated on the subject. Do not rely on well intentioned but often, sometimes wrong advice. Do the numbers, not blindly plod down the path. For example, while a tax deferred contribution may at the time sound good; down the road may not be so good. For example: if you are an O1 your marginal tax rate is about 15%. If you contribute to TSP or traditional IRA's you will delay the tax but when you retire you SHOULD be in a bracket far above 15% marginal. Thus you delayed paying 15% to pay later at 35% or more. There are other issues such as not being able to be taxed at low capital gains taxes on investments, but when you withdraw be taxed at a higher amount.
Be informed. WWW.TSP.GOV is the TSP site. Looking at TSP numbers, they are impressive, but not unique. They simply track SP500 Index, Willshire and etc, available to anyone, e.g., SPIDERS.
Site for IRA's and 401-K is at IRS
.
I believe all should save at least 20-25% of the base gross income. TSP etc are very good if one does not have the discipline to save on their own. The programs take money directly and will not let you withdraw for such things as buying a car or new stereo. (Yes, I know ROTH IRA does, but in general)
My point it to get educated on the subject. Do not rely on well intentioned but often, sometimes wrong advice. Do the numbers, not blindly plod down the path. For example, while a tax deferred contribution may at the time sound good; down the road may not be so good. For example: if you are an O1 your marginal tax rate is about 15%. If you contribute to TSP or traditional IRA's you will delay the tax but when you retire you SHOULD be in a bracket far above 15% marginal. Thus you delayed paying 15% to pay later at 35% or more. There are other issues such as not being able to be taxed at low capital gains taxes on investments, but when you withdraw be taxed at a higher amount.
Be informed. WWW.TSP.GOV is the TSP site. Looking at TSP numbers, they are impressive, but not unique. They simply track SP500 Index, Willshire and etc, available to anyone, e.g., SPIDERS.
Site for IRA's and 401-K is at IRS
.
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