Tsp

[Brett327]

Speaking of, the year is nearing an end.... the max Roth IRA contribution this year is $4000 right?

That is correct. Most of the time, you can contribute for the last tax year right up to the point when you file your return. As for the rest, I have a Capital One high yield savings account which gives you ~3.75% instead of the .5% you probably get in your checking account. This is where all my idle cash goes before it gets shunted to one of many IRA and non-IRA mutual funds. TSP is good, at least a lot better then it used to be, but if your IRA limit is met, take a look at some of the regular mutual funds offered by firms like Vanguard and Janus, etc. Lastly, while it has been a good performer recently, I own Haliburton stock just so I can tell left-wingers and piss them off.

Brett

 

[Fly Navy]

My savings gets 2.xx%, I can't remember exactly. Not too bad. (USAA)

Never thought of just buying mutual funds. I don't know how that works.

 

[Brett327]

My savings gets 2.xx%, I can't remember exactly. Not too bad. (USAA)

Never thought of just buying mutual funds. I don't know how that works.

Exactly the same as when you do it as an IRA, you just don't check the IRA box. Sometimes the minimum initial investment is higher, but not always.

Brett

 

[Fly Navy]

Exactly the same as when you do it as an IRA, you just don't check the IRA box. Sometimes the minimum initial investment is higher, but not always.

Brett

Now what's the difference, you're just not bound by the restrictions of the IRA right? You can move your money around how you please, take it out when you please, etc? But you pay taxes on the dividends?

 

[Chubby]

Any word on the new L Funds for TSP, i.e.- L2040 etc.? Worth a shot?

 

[Brett327]

Now what's the difference, you're just not bound by the restrictions of the IRA right? You can move your money around how you please, take it out when you please, etc? But you pay taxes on the dividends?

Yep, you can move it around as you like between the various instruments and funds. You just pay capital gains tax if you sell shares - cash out essentially.

Brett

 

[FlyingBeagle]

Great info everyone. Looks like I have plenty of options. I have heard someone mention that its a good idea to max the roth IRA before the TSP, so I'll probably do that. Sounds like you all have some good ideas on how to diversify the TSP, but I'd still be interested to hear anyone's take on these L funds. We had a USAA guy come talk to us and show us how small investments early on can really add up in a retirement account, so I want to make the most of that, but not at the expense of an emergency account (car troubles, etc). I heard this type of savings isn't as necessary for military types sicne we tend to have better job security, so I'd be interested in what everyone recommends for this as well.

 

[Fly Navy]

so I want to make the most of that, but not at the expense of an emergency account (car troubles, etc). I heard this type of savings isn't as necessary for military types sicne we tend to have better job security, so I'd be interested in what everyone recommends for this as well.

Always always have emergency money tucked away. You think your job is that secure? Ask those guys that attrited out of API or Primary. That, and you never know when you're going to get slammed with financial burden. I have AT LEAST a months pay in my savings, at the very least.

 

[squeeze]

My savings gets 2.xx%, I can't remember exactly. Not too bad. (USAA)

Never thought of just buying mutual funds. I don't know how that works.

ING brotha
USAA's savings rates blow

I have an ING savings at 3.5% that has no minimums and you can link external accounts to it. As of now, I set pretty much all my bill money to go to that before I have them paid from the account... thus, it's earning interest in the downtime.

Lemme know if you're thinking of an acct... I can give you a referral and get free money... I'll give you half

 

[FlyingBeagle]

BTW, anyone know of a good financial planner in the Pensacola area?

 

[skidkid]

BTW, anyone know of a good financial planner in the Pensacola area?

No but I can tell you that the place is full of bad ones. I dont know how but they seem to get a hold of the recall roster and call and telly ou how they used to fly balnk for the blank and that is why you should invest with them.
Beware all of them

 

[Squid]

I've givn my $0.2 in a much older thread. I didn't reas all of this one so forgive me if I'm saying things that have already been said:

TSP is tax deferred, IRA's are as well. Roth's are post tax money, so it's all free.

If you have a lot to invest (or even $50/month), and are YOUNG and don't have to worry about tax brackets/savings just yet.
1) start with a Roth IRA. max it out before moving to step 2

I do mine through USAA. They have plenty of "USAA brand funds" to choose from. Very secure to very risky, depending on your taste. Me personally, I'm 24, so I put everything into the risky category, because if I loose it ALL (bif if), I still have XXX years to recoup it. Vanguard is also another company with a great reputation (they need $1000 to start a roth, USAA needs $250). Roth caps are $4000/year. anything you pull out is FREE $$$$$$$.

2) move on to a traditional ira.
again, can be with any reputable company. setup just like a roth with an endless amount of funds you can put your money (individual stocks if you really want), except this money is tax deferred, meaning you are not charged the 15% tax on it likthe the rest of your income. it pretty much boils down to you never made the money inthe first place, UNTIL you take it out again. When you do, you will be taxed at whatever % rate you make for that time. Limit $4000/year.

If you are military
3) move to the tsp.
Acts just like a traditional IRA (considered a 401k). You are limited to those 5 (+4) funds, CGFSI + L. Max cap is $14k.

If you are not military, contributing to the 401k or TSP would move higher in the list if you employer "matched funds", contributing a % of what you give. Essentially, this is free money, and if you are contributing significant $$$, this may take priority of either of the two things above it.

also, you'll have to read up on withdrawing money, ages, penalties, etc.

I am tired, and I'm on the early morning page. g'night.

 

[Fly Navy]

Hmm, traditional IRA, really? I don't know much about them.

 

[The Chief]

I've givn my $0.2 in a much older thread. I didn't reas all of this one so forgive me if I'm saying things that have already been said:

Good summary. They way I figure, if the good Ensign can repeat an old thread, I can too, sort of.

Lets take a look at some actual numbers.

Lets assume you have $4,000 (before Taxes) that you can spare each month, that you are in a 25% marginal tax rate (Federal, State and local). Traditional IRA/TSP or Roth IRA?

Roth IRAYou gotta pay Uncle 25% leaving you $3,000 to invest. That $3,000 invested each year, same tax rate and an assumed 8% ROI will render you about $875,000 at the end of 40 years. All yours, you paid taxes on the original $3,000 each year (120,000), and no taxes at all on the $755,000 in earnings. WHOA!

Traditional IRA/TSPContribution is tax deferred so you can put the whole $4000 into the IRA/TSP. Uncle gets no part of it, yet. Assuming that you will continue to contribute for 40 years at the same rate, and assume a conservative 8% ROI, after 40 years you will have approximately $1,200,000. Now you gotta pay Uncle for not only your contribution $160,000 but also the $1,040,000 in earnings. Since you flew for Mega Arlines have one of those nice cushy retirement plans, you are in the 40% marginal tax bracket. Assumming constant income and prudent disbursements after you reach 70YO, Uncle is going to want about $480,000 of that leaving you $720,000, WHOA! Roth guys are way ahead. Now if you bought that piece of land in Meridian when you were a STUD, you retire back there, living off the land, not much income except your IRA, your tax bracket is 22%, then Uncle is going to want $264,000, leaving you just shy of a million. Better off than the Roth guys!


Both scenarios assume a prudent annual distribution of the IRAs/TSP. And a radical assumption that tax rates will not go up!

Note: Change the assumptions a bit, assume a more aggressive 10% the Taditional/TSP will yeild $2,200,000, Roth about $1,600,000.

Now you can get to the question of where to put your money. I will relate one TSP account that I know of:

Civil Service employee retires in December 1996 with $100,000 in a TSP. Has it all in C fund. In 1999 realizes what is going on and shifts all to S fund. In 2000 shifts it all to the F fund and in 2003 she puts it all in S fund. Now at the end of 2004, eight years later, that TSP account is worth $620,000 or over half million dollars in earnings in just 8 years. Actual figures! WHOA. Now had she left it all in the C fund, it would have been worth about $225,000 or a ROI of $125,000.

In the last 5 years, even worse performance in the C fund. Actually a negative 4% average of the five years.

My point is that it is no easy, were it easy and simple, most all would be very rich. You need to not only save but also be knowledgeable about money.

 

[ryann24]

Good summary. They way I figure, if the good Ensign can repeat an old thread, I can too, sort of.

Lets take a look at some actual numbers.

Lets assume you have $4,000 (before Taxes) that you can spare each month, that you are in a 25% marginal tax rate (Federal, State and local). Traditional IRA/TSP or Roth IRA?

Roth IRAYou gotta pay Uncle 25% leaving you $3,000 to invest. That $3,000 invested each year, same tax rate and an assumed 8% ROI will render you about $875,000 at the end of 40 years. All yours, you paid taxes on the original $3,000 each year (120,000), and no taxes at all on the $755,000 in earnings. WHOA!

Traditional IRA/TSPContribution is tax deferred so you can put the whole $4000 into the IRA/TSP. Uncle gets no part of it, yet. Assuming that you will continue to contribute for 40 years at the same rate, and assume a conservative 8% ROI, after 40 years you will have approximately $1,200,000. Now you gotta pay Uncle for not only your contribution $160,000 but also the $1,040,000 in earnings. Since you flew for Mega Arlines have one of those nice cushy retirement plans, you are in the 40% marginal tax bracket. Assumming constant income and prudent disbursements after you reach 70YO, Uncle is going to want about $480,000 of that leaving you $720,000, WHOA! Roth guys are way ahead. Now if you bought that piece of land in Meridian when you were a STUD, you retire back there, living off the land, not much income except your IRA, your tax bracket is 22%, then Uncle is going to want $264,000, leaving you just shy of a million. Better off than the Roth guys!


Both scenarios assume a prudent annual distribution of the IRAs/TSP. And a radical assumption that tax rates will not go up!

Note: Change the assumptions a bit, assume a more aggressive 10% the Taditional/TSP will yeild $2,200,000, Roth about $1,600,000.

Now you can get to the question of where to put your money. I will relate one TSP account that I know of:

Civil Service employee retires in December 1996 with $100,000 in a TSP. Has it all in C fund. In 1999 realizes what is going on and shifts all to S fund. In 2000 shifts it all to the F fund and in 2003 she puts it all in S fund. Now at the end of 2004, eight years later, that TSP account is worth $620,000 or over half million dollars in earnings in just 8 years. Actual figures! WHOA. Now had she left it all in the C fund, it would have been worth about $225,000 or a ROI of $125,000.

In the last 5 years, even worse performance in the C fund. Actually a negative 4% average of the five years.

My point is that it is no easy, were it easy and simple, most all would be very rich. You need to not only save but also be knowledgeable about money.

Super info! Thanks a ton! We have been subscribing to Money magazine, has some good info in there. Also Vanguard will send you a ton of free literature. I have a traditional IRA from my rollover when I decided to stay at home with our little ones. Question, would you roll that over to a Roth or just keep it there and open an additional Roth? We met with this guy at NFCU here in P'cola and he was saying something about how you may want to do that but see how it will affect your taxes this year. We sold our house and want to invest the majority of the money. We obviously are limited to how much of a lump sum we can dump into the IRA's, since the max is 4k per, so our question is what to do with the rest. Since I have Vanguard I was thinking about working with them since they have very low fees, etc. My hubby is not real wild about paying some schmuck (sp?) to manage our money and make some bucks. Curious to what ya think?