15k limit by year 2006. Are you ready?

Are you ready to contribute 15k for TSP in year 2006?

  • Yes, I am ready to contribute 15k for 2006

    Votes: 0 0.0%
  • No, I am not ready to contribute 15k for 2006

    Votes: 0 0.0%
  • No, but I am working to reach that goal

    Votes: 0 0.0%
  • I do not plan to contribute 15k to TSP

    Votes: 0 0.0%

  • Total voters
    0

pyriel

Active member
imported post

2006 is a significant event for TSP participants. Just wondering how many here are ready to max out with the 15k limit by year 2006? We all know that the more we save the more we will benefit in the end. This purpose of this poll is to show how many are ready to max TSP and how many are not ready. If they are not ready, I'd like to get some input and discussion onwhat are they doing to reach that goal. Thank you.
 
imported post

To contribute $15k to TSP, I'd have to kick in nearly 30% pretax. Sorry, but even for a miser like me, that's insane. :P

I'll just continue to raise my TSP witholding by 1% per year (currently at the maximum of 15% :shock:)and max out the Roth. At my age, this is more than enough.
 
imported post

Folks who have 15+ years to retirment need to seriously reconsider contributing anything more than the match amount (5%)in to TSP. This is because oftwo importantreasons:

1. The max tax amount you save 20%+by contributing this extra money will be dwarfed by the taxes you will pay when you get to retire. Any one here does not belive that, with all those deficit the gubbermint is running, they will not be stuck with higher taxes on income 20 years from now? Also, Remember, the extra 10% you are "allowed" to contribute alsowill not escape the social security taxes (7.65%) and so you really are not saving that much in taxes as you think.

2. Since the asset class available in TSP is very limited, you are better off opening your own Roth IRA elsewhere and investing in emerging markets, oil, gold, natural resources, utilities, international real estates, and yes, even junk bonds--all asset classes you are unlikley to find any time soon in TSP.

Also, worst of all . don't forget that even in these days of computerized investing, it takes any where up to 2 pay periods to get your TSP contributions actually get fully implemented on your paycheck. That is 28 days when in emergency you want to adjust your pay!!!
 
imported post

Mike & Sr,

Although the asset classes for TSP are limited, don't you think that it is much easier to move your funds to safety when there is a need. I've also done some analysis about TSP growth vs. ROTH growth and I am finding that there really is not much difference even TSP participant has to pay tax towards the end. I felt the same way in the beginning until I ran them through excel. Do you think that either one of you can do one and show us your result. I just want to validate it with my findings.
 
imported post

Sr,

My plan is to have my family unit in the 15% tax bracket when I finish employment.

My hope is that eventually my defined benefits pension will be converted to a defined contribution plan - that will allow me full control of the resources - take only the money that I want. My wife has already made her conversion - so her money belongs to her to invest as appropriate. Social security can wait until later years. By being in the 15% bracket - and that requires planning - all capital gains and dividend income is 95% tax free. The TSP program will add to income because of the RMD - but if one slowly converts to a traditional IRA and then rolls those funds gently into a Roth IRA one can possibly have income without increasing the tax bracket.

I would prefer to be independent of any set pension plan or annuity program and just invest the funds as I see applicable - the money would be mine. Forget the monthly pension check - social security will fill that gap. The TSP provides ample options to make money - all one needs is to avail and participate. Take some risk and use the money to make more money.

Dennis
 
imported post

$15K into TSP...been thinkin' about that for a while. I wanna, but I don't wanna.

I can...but just because I can doesn't mean I should.

I can...but I won't have anything for Scottrade and I really miss playing with stocks...and the ridiculous gains and that "Master of the Universe" feeling. :D

I didn't know SS tax was not exempt on 403(b) contributions...that does make it less appealing.

I do need to make sure I don't pop a bracket...guh...more fiddling with numbers just to keep my own money....TEDIOUS.

I find it hard to believe that a well-managed regular brokerage account won't outperform (as in "kick the crap outta") a well-managed TSP investment. The profit-opportunities of..well...the whole world are much greater than five index funds.

I definitely will up my TSP..but the max...for now, yes...but I'll see.
 
imported post

rolo,

A Roth IRA has a lot more potential and flexibility for sure. The only problem is it takes so long to build a position that you can do anything with - it takes money to make money. It's great if one is younger and has ample time to build resources. In 2006 I can put in $5000/year - it just takes forever. Rolling from a traditional IRA when in a lower tax bracket to the Roth IRA will build faster. You just have to live on savings so one doesn't have a large tax bracket - requires much planning.

Dennis
 
imported post

Birchtree wrote:
Sr,

My plan is to have my family unit in the 15% tax bracket when I finish employment.
With all that investment that you have, it is hard for me to fathom that you'll make that 15% tax bracket.;-) Wishful thinking, perhaps?
 
imported post

Birchtree,

I agree with what you are saying regarding position. My plan is to max the TSP where about 85% of the balance of our retirement accounts reside and contribute the tax savings generated by TSP contributions plus anything else I can muster to our Roths. Will not be able to max out TSP and both my wife and my Roths, but cannot ignore the power of the TSP compounding at this point.Will begin convertinggradualllyfrom TSP to Roth in the lowest tax bracket available at my MRA of 56 (43 now). May get bit by higher ratesthan 15% at my MRAbutthe TSP is the money makerdue to positoning and the compoundingshould help to compensate for a higher tax rate at MRA 13 years from now. The TSP is like a rather enormous snowball at this point as compared toour Roths (about 5% of our savings is in the Roths). I will only convert up to the ceiling of the lowest tax bracket available each year. Will take social security as late as possible.
 
imported post

Pyriel,

You are over looking the advantages of capital gains - you take them only when you feel the desire - there is no rush to the IRS.

There have been so many companies in the last ten years making employee conversions of defined pension plans to defined contribution plans, that I'm sure Uncle will eventually do the same. That's probably one reason the L funds are being offered in TSP - the mechanism for the conve rsion will already be in tact. The advantage of the defined contribution plan is that it works just like TSP, only you are in control of the income that is available - you can take it all at once or none until you are ready and then you name the amounts and conditions of distribution. There is of course the RMD. Staying in the 15% bracket does require planning - but I think it can be done and will allow me to keep more of what I have earned.

Dennis
 
imported post

B,

If you do that, you will never be able to finish off your retirement fund. I guess this is the reason why you are converting them to ROTH so that your heir will benefit towards the end. I like that kind of thinking... Just don't shortchange yourself...

P
 
imported post

I can't crank out scenarios on Excel until I become better at using the program. This won't happen until I get a new computer (sometime in the next 3 weeks), since my current system is 5 years old and is having "issues"... :shock:

In the meantime, here are my thoughts:

- When you're young (and lower on the federal payscale *cough*), it makes no sense to try to even come close to maxing out the TSP contribution. $15K is almost 30% of my base annual pay. Considering that I, along with most other young workers, have student loan debt + car loan debt + a mortgage (or in the process of saving money to purchase a home), it is highly unrealistic to expect to lop off $15k pre-tax for anything, particularly if it is for something that won't be needed for another 30+ years.

- Roth vs. TSP is a more complicated issue. This will require me to crunch some numbers... hopefully, I'll have a system within a couple weeks and can do that. For the time being, regarding my own situation, I believe that my tax rate will only go up over time. Part of that belief is due to being early in my career, meaning I have not hit my peak earning potential yet. Part of it is also due to the belief that my minimum distribution at retirement could very well be higher than my gross pay is right now. The third part of this belief stems from government mismanagement of its finances and entitlement programs, which will inevitably lead to cut backs and higher taxes to compensate. At any rate, I'm already kicking in 15% to the TSP and maxing the Roth (two years running), plus I have a modest brokerage account with scottrade and am also utilizing a moneymarket account for emergency reserves. If anyone reads this and expects me to do more, I say bite me. :P
 
imported post

Mike,

Sounds like you are on track. Startingyour contributions while you are young will give compounding an opportunity to work for you and your plan to achieve a strong position in both a Roth and TSP should work outgreat 30+ years from now.Enjoy those 30 years with your family and friendsadding to TSP contributions when it makes sense for you financially. WhenI spoke to aCFP recently, he pointed out how many things could change between now and my retirement. 30 years is a very long time, very fuzzyin terms of what we know now (even Yoda has difficulty with this - the future is difficult to see, always changing :)).I guess if a had a word of caution in regards to what you are doing it would be to be very careful regarding your assumptions about tax rates 30 years from now. You may be in a higher bracket later and overall, taxes may be higher but at the same time - you areforegoing a certain tax break now, contributions now, over 30 years of compounded earnings on those contributions - in reactionto a perceivedtax structure 30 years from now.Opportunity costs makechoices like contributing to a Roth or TSP difficult sometimes.
 
imported post

Birchtree wrote:
A Roth IRA has a lot more potential and flexibility for sure.
I fund both, TSP and Roth, and can still put $15K into TSP and $8K into my Roths, so TSP vs. Roth is not an issue for me. My dilemma is TSP @ 15K vs. Scottrade (regular brokerage account) since I won't have much for discretionary spending if I max TSP and try to rebuild my Scottrade account.

Oh! I just realised another factor: Scottrade is marginable and TSP is not, so my potential gains double. Also, you cannot short-sell in the TSP.

I will probably not fund the TSP fully at first in favour of Scottrade and once I get momentum going there, then fund TSP fully. I'll adjust as market conditions dictate, I suppose.

Birchtree wrote:
In 2006 I can put in $5000/year - it just takes forever.

Not unless yer old.
 
imported post

Pete1 wrote:
...be very careful regarding your assumptions about tax rates 30 years from now. You may be in a higher bracket later and overall, taxes may be higher but at the same time - you areforegoing a certain tax break now, contributions now, over 30 years of compounded earnings on those contributions - in reactionto a perceivedtax structure 30 years from now.
Exactly! Go with the definites rather than the "maybe"s. You don't want to forfeit all of that time, the bigger factor in the formula for growing money.
 
imported post

Rolo,

If I were younger - you can check my profile - it's all there - I would put my investing programs on auto pilot and concentrate on dividend reinvestments. One reason I need a deferred compensation program like TSP is to offset my current dividend income to keep taxes lower. A margin account can conceivably help do the same thing - the charge is deductable against passive income. Opening a Roth for me has no advantage - I need shelter today. There are however many advantages for some folks starting out - you can borrow from it with no penalties, you can set up automatic deduction plans from your checking account, and the dividends are reinvested for free in most accounts. When one is older you can draw from the plan tax free for a year and end up with no tax bracket - you know what that means? That is when you start the transfer process from a traditional IRA into a Roth IRA. It's all about not having an AGI. (Adjusted Gross Income) The AGI will rule your life in retirement - and all means should lead to reducing AGI. Take care.
 
Back
Top