Combat zone TSP strategy

[Mallard]

Hello,

First time posting here and have a scenario I need help with. What is the best strategy to max out TSP if you will be in a combat zone for six months of one calendar year? Would you max out traditional TSP while stateside, and then do Roth TSP when in the combat zone for six months? Trying to figure out what the rules are and figure out what the most advantageous approach would be to try and max the 51K. Hope this makes sense. Thanks in advance.

 

[tsptalk]

Welcome Mallard. I'll leave that for our fellow military folks - just wanted to say thanks for joining us, and thanks for your service!

 

[Frixxxx]

Hello,

First time posting here and have a scenario I need help with. What is the best strategy to max out TSP if you will be in a combat zone for six months of one calendar year? Would you max out traditional TSP while stateside, and then do Roth TSP when in the combat zone for six months? Trying to figure out what the rules are and figure out what the most advantageous approach would be to try and max the 51K. Hope this makes sense. Thanks in advance.

Welcome Mallard,

The answer to your question is what ever your choice is. Remember that your tax footprint for the taxable years will determine your choice. Personally, while you're active duty and in a combat zone, the Roth IRA is better. Since you aren't paying taxes while there, you can max out your contributions. You will be limited by the max amounts for the year. If your setting up to retire from the military remember that your retirement check is taxable income in retirement. 401 tax deffered (TSP) is also taxable in retirement. The Roth will not be and so the best bang for your buck while not being taxed.

However, I caution total investment of all income. Gett yourself out of any debt, create a slush fund, and put enough away for a new car. That way you'll have most emergencies handled in case one or more arises.

 

[Mallard]

Thank you for the reply. I have zero debt with an emer fund established. I believe the combat zone tax exclusion rules say you can put a max of 51K in TSP but only 17.5k of that can be ROTH TSP with the remainder being traditional TSP. Because of that, i believe the best move would be to put 17.5k in traditional TSP during the first six months of the calendar year while i am stateside, then put in 17.5k in Roth TSP and 16K in traditional during the six months i will be in a combat zone. This will make a total of 51K (17.5 Roth TSP and the rest traditional). Does this make sense? I think this is the best strategy based on the rules and my timeline. Anyone disagree? Thanks again.

 

[Frixxxx]

Good choices....If you have kids, you might also want to get a college fund going as well. Also, think about some dividend paying stock purchases......Making a nice buy and hold on these over time will also increase your retirement......