am i on the right track?

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law87

Active member
hey guys, i been a member of this board for a while now. there's a lot of members here who have experience with life so i want to know if i am on the right track toward retirement.

Currently i am 23 turning 24 in may. I am in the military as an E-5. i contribute 12% (just change to 15%) of my salary toward TSP, i have about 12k in tsp right now. i also have 18k playing stock, i also just bought a house using VA loans, i have 1 roommate to help with mortgage payment. I know a lot of website tell people to save 10% toward retirement, however that number is very broad, 10% of $2000 is certainly very different then 10% of $5000. so my question is am i being aggressive enough with my retirement plan?

Thanks for your input :) and happy easter
 
law87 said:
i actually just got off the phone with a navy federal financial advisor he reccomend me just try to put more into TSP rather then open a roth
Click to expand...

Later on, when you take distributions from your TSP, you can roll those distributions into your Roth IRA and not pay any taxes.

But like I said, you will get a lot of answers and much valued information from the more seasoned investors in this MB. It's a little slow right now with Easter and the NYSE being closed. Monday should be alive and kicking.:D
 
It comes down to taxes and investment goals.

Since you have a house you probably have enough interest deduction to keep your taxable income (AGI) low enough that investing in your TSP is not a future worthy investment.

I would recommend a ROTH IRA as it gives you tax free return at retirement.

But it really comes down to your tax rate. you probably are at the 10% threshold. So you can't lower it much more.

Good luck!

Calculator:
http://www.statefarm.com/learning/calc/iracalc2.asp
 
Frixxxx said:
It comes down to taxes and investment goals.

Since you have a house you probably have enough interest deduction to keep your taxable income (AGI) low enough that investing in your TSP is not a future worthy investment.

I would recommend a ROTH IRA as it gives you tax free return at retirement.

But it really comes down to your tax rate. you probably are at the 10% threshold. So you can't lower it much more.

Good luck!

Calculator:
http://www.statefarm.com/learning/calc/iracalc2.asp
Click to expand...

so your saying a max contribution to roth then worried about tsp?
 
law87 said:
so your saying a max contribution to roth then worried about tsp?
Click to expand...
Like I said it is your tax rate that you need to play with.

Your base pay is about 2600 a month, and you get a housing allowance that is not taxed.

Based on that number in 2010, your tax liability would be: 330/month or 4,000 a year. Since you get the deduction of interest on your house, you probably got a write-off of about $15K (estimated) which brought your Adjusted Gross Income to about to about $16K . If you put into TSP 12% you lowered your taxable amount by $3K and now you are at $13K taxable income.

You could probably write-off a few more expenses and get to under 10K of taxable income and hit a straight 10%.

Utilizing this information, you probably don't need more tax deferred ways to hide money. So, because of that, you would look to a ROTH IRA so that you can use after tax dollars to invest for 40 years that when you go to use that money, the principal and interest ARE NOT taxable..

Make sense?

Most of the numbers I used were based off the internet and the Military Pay charts. There are a few other calculators that can help you come to a more realistic.

Remember 10% tax on first 10000.
and 15% on money after that. So 13K would pay tax:
10000 *.1 = 1,000
plus
3,000 *.15= 450
Tax math!
 
Frixxxx said:
Like I said it is your tax rate that you need to play with.

Your base pay is about 2600 a month, and you get a housing allowance that is not taxed.

Based on that number in 2010, your tax liability would be: 330/month or 4,000 a year. Since you get the deduction of interest on your house, you probably got a write-off of about $15K (estimated) which brought your Adjusted Gross Income to about to about $16K . If you put into TSP 12% you lowered your taxable amount by $3K and now you are at $13K taxable income.

You could probably write-off a few more expenses and get to under 10K of taxable income and hit a straight 10%.

Utilizing this information, you probably don't need more tax deferred ways to hide money. So, because of that, you would look to a ROTH IRA so that you can use after tax dollars to invest for 40 years that when you go to use that money, the principal and interest ARE NOT taxable..

Make sense?

Most of the numbers I used were based off the internet and the Military Pay charts. There are a few other calculators that can help you come to a more realistic.

Remember 10% tax on first 10000.
and 15% on money after that. So 13K would pay tax:
10000 *.1 = 1,000
plus
3,000 *.15= 450
Tax math!
Click to expand...


forgive me i am super slow at this :o

i understand i need to get my Adjustable down to 10k or less so i can do one or two thing, 1 increase my TSP to 24% OR contribute $300 to roth IRA per month and keep the 12% in my tsp.

so by doing that i will be at the 10% bracket?

also what if i make gain playing stock? i have to adjust my contribution more toward retirement in order for me to be in the 10% bracket?

by the way, thanks for helping me out, i appreciate it.:)
 
I don't know all the numbers you're throwing around, but make sure you don't exceed your allowed contribution limits per IRS ($16500/yr for TSP, $5000 ROTH IRA; I think) 'cause I hear the penalties can be painful.

Good luck, I know a lot of people that wish they were in the financial position you are in many years ago (me, 21 years ago for example).

You are on the right track and will be able to retire in great shape!
 
The 10% is more like 15% and yes it changes with the size of your income but you should pay yourself first. Life is not worth living if you can enjoy it to a small degree and that is up to the individual. So as the dollar amount of your income increases, so does the dollar amount of the fixed percentage you contribute.

TSP or Roth?

1. TSP if you get a match, always.

2. Roth if you are in a tax free theater of operation. Why? No taxes when you earn it and no taxes when you spend it.

3. TSP if you are making taxable income. Why? Taxes are deferred until you withdrawal. As a E-5 you don't want any tax liability to Uncle Sam, Congress will just **** it away. :rolleyes: Chances are most of us will not draw such a large income once we retire to pay income taxes any ways and depending what State you retire to, you may not have to pay any State income tax either.

For a high risk trading account I like Roth, my two cents.:nuts:
 
RealMoneyIssues said:
I don't know all the numbers you're throwing around, but make sure you don't exceed your allowed contribution limits per IRS ($16500/yr for TSP, $5000 ROTH IRA; I think) 'cause I hear the penalties can be painful.

Good luck, I know a lot of people that wish they were in the financial position you are in many years ago (me, 21 years ago for example).

You are on the right track and will be able to retire in great shape!
Click to expand...

O i'm sure i wont max out TSP, theres no way i can ever do that, however the roth i can try

thanks for the compliment :)
 
Show-me said:
The 10% is more like 15% and yes it changes with the size of your income but you should pay yourself first. Life is not worth living if you can enjoy it to a small degree and that is up to the individual. So as the dollar amount of your income increases, so does the dollar amount of the fixed percentage you contribute.

TSP or Roth?

1. TSP if you get a match, always.

2. Roth if you are in a tax free theater of operation. Why? No taxes when you earn it and no taxes when you spend it.

3. TSP if you are making taxable income. Why? Taxes are deferred until you withdrawal. As a E-5 you don't want any tax liability to Uncle Sam, Congress will just **** it away. :rolleyes: Chances are most of us will not draw such a large income once we retire to pay income taxes any ways and depending what State you retire to, you may not have to pay any State income tax either.

For a high risk trading account I like Roth, my two cents.:nuts:
Click to expand...

military personnels dont get matching contribution :(
 
law87 said:
thanks frixxx, since BAH is not taxable i will not include that as part of my wages right>?

if thats the case i only make 30k(?) a year so it will put me at slightly lower then 15%
Click to expand...
Correct, only your base pay and bonuses should be taxable. (excluding any oversea combat pay.):blink:
 
Frixxxx said:
Roth doesn't affect taxes...It's only AFTER TAX dollars that go into a ROTH.
:cool:
Click to expand...

o yea good point! i think i know what to do now..open a roth account put in 200 a month and up tsp contribution to maybe 18% maybe more

thnx frixxx
 
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