2006 tsp becomes unlimited?

[azanon]

imported post

To answer your question, I would say TSP for sure if it keeps you from moving into the next tax bracket. I will funda Traditional rather than a Roth IRA when I begin to hit my current bracket's ceiling in order to stay there.

Just want to make sure you understand the ramifications of moving into another tax bracket. This is sometimes misunderstood, is why:

The only siginificance of "moving into a new tax bracket" is that it identifies what your marginal tax rate is. For instance, ifmy overall earnings went$1,000 over into the 28% tax bracket, all that means is that i will have to pay 28% tax rate ONLY on the excess 1K, but i'll still only pay at a 25% rate all the monies in that bracket, and 15% for all the money in that bracket, and so on and so forth. Point: being 1K into the 28% bracket DOES NOT mean i will have to now pay at the 28% rate for all the money i made that year.

So there's no reason to worry about sliding into a new bracket. You'll just have to pay the higher rate only on those funds that spill over into that bracket. No big deal, and no reason to adjust what you do in most cases.

NOW..... if you make so much money that you may be subject to the alternative minimum tax (AMT), now THERE'S a reason to lower your taxable income. AMT can be quite nasty, so i'm told.

 

[Rolo]

imported post

Oh, wow, I did not realise that, az, good point! (No matter how much time I spend on tax law, there is always all this stuff that still eludes me, guh!)

Although your point mitigates it, I think my point still stands. If I were only $1,000into the 25% bracket, then I still want to keep that $100 tax difference in my pocket (25% * $1,000 vs. 15% * $1,000). I've beenplanning to stay in this bracket as long as possible, perhaps even until retirement. You can look at it as an instant 10% gain on my income just for arranging things just so, especially if it is as easy as putting $1,000 in the TSP, which would effectively cost you only $900.

 

[bkrownd]

imported post

pyriel wrote:

Smine, I just had a revelation... Planning for 2006 is a major task for many TSP members who are not very familiarized with the system. Although, we will be allowed to put in 15K (or 20K for some), not too many people will be able to afford them if they are not ready NOW. 15K (if they want to max on contribution) divided 26 pay period is about 577 dollars, and to some that is alot of cash.

Is the $577 bi-weekly before or after the agency match is added on? If after, how does the part of the agency contribution you only collect AFTER vesting (i.e. some might never receive it) figure in?

tia, bkr

 

[smine]

imported post

They don't match mine because we're old system CERS. It has only been a recent act to allow old system people to go up in % invested. We stayed at 5% forever, so being able to increase our investments was great. I agree that this amount will be tough for some folks each check but it will be worth it in the long run.

 

[Mike]

Is the $577 bi-weekly before or after the agency match is added on?

I just saw this post and thought I'd resurrect the thread.

The IRS maximum applies to what you contribute to the retirement plan. The agency match is not a factor here, since it has no bearing on your taxable income.

FWIW, it is impossible for me to contribute the IRS maximum until I have paid off my student loans in 2008.

 

[bkrownd]

FWIW, it is impossible for me to contribute the IRS maximum until I have paid off my student loans in 2008.

Doh! That's a long time. Anyhow, first things first. I'm enjoying watching my TSP rise by $620 every other week. Some weeks it gets paid more than I do.

 

[Birchtree]

G fund builder

bkrownd,

My good fellow participant, if you are dumping that money into the G fund every two weeks, you are spinning your wheels. Please say it isn't so.

Since the end of December my dollar cost averaging into the C fund has provided prices of $13.96, $13.70, and $13.74, I wouldn't mind a $13.60 if I could get it. It's a long way to $17.00, and I plan to remain until victorious.

Dennis

 

[bkrownd]

My good fellow participant, if you are dumping that money into the G fund every two weeks, you are spinning your wheels. Please say it isn't so.

New contribs are 20% G 40% C 40% S. Gotta have some G reserve to spend when the other funds slide.