halfway through the deployment

[TSP@ti2de]

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OK, the time for choices is coming up fast!

I maxed the Savings Deposit Program at $10K within a month of arriving in country. You gotta stay on top of that program; there is a lot of bad intel out there. First of all, max early. You gotta check with DFAS to make sure that your deposits posted, and be sure to save all of your receipts. If your account is maxed, you need to request quarterly interest withdrawals (about $335) at the end of March, June, September, and December. Here is the link that contains everything you need to know and do:

http://www.dod.mil/dfas/money/milpay/savingsdeposit.htm

OK, now on to the TSP. Originally, I thought2006 was capped at $15K, but checking out the TSP site, I can contribute up to $44K in the tax-free zone. I've been paying down my mortgage every month, and got it down to $45K. The thought of maxing this out excites me, there is nothing to buy here anyway, but I know that my wife would like to eventually move to a bigger home. I coulddo a TSP loanwhen I get home, and the current interest rate is at 4.625%, not bad. What do you think?

 

[Birchtree]

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What's easy to do is almost always the wrong thing to do. And what's hard to do is almost always what makes you money. If you put more money into TSP you will by pass immediate gains for a better future in the financial area. Stick with a solid dollar cost averaging plan and stay out of the G fund. I'm particularly fond of the dull wall flower C fund - I think she shines for the next three years at a minimum. You may eventually need that mortgage interest deduction. Take care.

Dennis

 

[TSP@ti2de]

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So, if I understand you correctly, I should TSP the money, eh?

 

[Birchtree]

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Yes, take advantage of the opportunity and sock away as much as possible - especially now that we are in a bull market. Perhaps even a secular bull market - might be worth getting a second job - only kidding. If you dollar cost average you'll be surprised how fast the money adds up when you are buying shares that are in the process of becoming more valuable. Remember patience is virtuous and there is nothing wrong with a little paranoia. Stay safe.

Dennis

 

[James]

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TSP@ti2de,

I don't understand how you maxed out the SDP at $10K within a month of arriving in country as you can't make deposits until you have been in a combat zone for 30 days and each month your deposit is limited to the amount of your unallocated pay (the same amount that hits you bank account) for that month. Even an O-4 will reqiure more than one month's unallocated pay to max it out at $10K.

The quarterly interest is $250.

You've got a complicated situation with trying to max out your TSP contributions for the year. I will only get the benefit of January in a tax-free zone so I plan on contributing all that I can in January, and over the next 11 months I will try to max out my contributions for those 11 taxable months at $15K. $15K divided by 11 is roughly $1364/month. Although the TSP right now only allows percentages, so I will either have to run slightly over for the year or slightly under. I'm not sure what happens if you run over for the year. But for me maxing it out at roughly $19K (because of when I'm redeploying back to the US) for the year is quite agressive. I have looked at a projected budget (I don't live by a budget, I just use it to see how much money I might have after my anticipated expenses.) and I see that my plans to max the TSP, and max a Roth IRA for the year would leave me with just under $1,000/month for other investments or frivilious spending. So my suggestion to you is to run the numbers for yourself and see how much money you would be leaving for you and your wife to live on at various contribution levels. Of course if your wife has an income that she can support herself on, then things get much easier to meet your maxing goal.

I too have a mortgage that I have been making an extra montly payment per year for the just over 18 months that I have owned the home. I have also been told by neighbors that my home has appreciated at least 28% in the 18 months that I've owned it. Regardless, I'd rather max out my taxed advantaged retirement accounts before paying down my mortgage early.

 

[pyriel]

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TSP@ti2de wrote:

OK, now on to the TSP. Originally, I thought2006 was capped at $15K, but checking out the TSP site, I can contribute up to $44K in the tax-free zone. I've been paying down my mortgage every month, and got it down to $45K. The thought of maxing this out excites me, there is nothing to buy here anyway, but I know that my wife would like to eventually move to a bigger home. I coulddo a TSP loanwhen I get home, and the current interest rate is at 4.625%, not bad. What do you think?

The rule for non deployed to deployed personnel differs with the IRS. So you are allowed to put in 44k while you are in a tax free zone.

I crunched the number on what is going to happen to your tsp if you were to borrow from it to buy a home. I don't know much about you so I ran a scenario. Here it is. 35 years old, with 100k in TSP, borrowed 50k to pay for downpayment and closing, which will leave him with 50k in TSP. Current TSP % is 4.263 (rounded) and if amortized for 10 years, member will have to pay $521.21 which is equivalent to $6254.22 per year. Since this is going back to members TSP account, it will then earn interest for the year. Member is expected to retire in 10 years and will contribute 15k per year as well.

It is amazing (unless my numbers are wrong) that taking out money from TSP instead of leaving it there actually accumulated more by the age of 60 with 10% annual return. 2.1M (borrowed to pay the house) vs. 1.7M (leaving it there)Please somebody relook at my figure for I think it is wrong but I redid it 2x andI came up with the same thing



Good luck to you....

 

[TSP@ti2de]

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you can't make deposits until you have been in a combat zone for 30 days and each month your deposit is limited to the amount of your unallocated pay (the same amount that hits you bank account) for that month

I think these rules are dependent on who is in charge. I mean, really, who is going to turn someone away that wants to save some money? A lot of the rules for us in Afghanistan seemed to be made up because of convenience, not standards.

The quarterly interest is $250.

Ah, you're right. 2.5%, duh. *kicks self*

if your wife has an income that she can support herself on, then things get much easier to meet your maxing goal.

Mama makes $70K, she don't need any help there, but she is looking to move someday. My personal debate is: sock away 100% of base pay while I am still tax-free until July (about $36,000), making up for all of the IRA contribution years I missed in my early 20's, or pay down my house, thus giving me a healthy 100% equity down payment if I buy another house? I think either decision is a good one, I mean, I'm not wanting to spend the money on a Corvette or something, but I think that the TSP contribution will do more for everyone in the long run, I'm not getting any younger.

 

[James]

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TSP@ti2de wrote:

you can't make deposits until you have been in a combat zone for 30 days and each month your deposit is limited to the amount of your unallocated pay (the same amount that hits you bank account) for that month

I think these rules are dependent on who is in charge. I mean, really, who is going to turn someone away that wants to save some money? A lot of the rules for us in Afghanistan seemed to be made up because of convenience, not standards.

The regulations on the SDP state as I have listed above. Here in Ramadi they checked all the figures before accepting a check. I know a few Marines out here who would have loved to just give them a check for $10K and have been done with it. But that wasn't happening. They did get turned away becuase they were supposed to be turned away.

I can only speculate, but I would say that the intent of the program is to encourage service members to save their earning while they are out here instead of spending it friviliously. Also the accural of interest for 60-90 days after leaving a combat zone also helps to curtail service members spending it all very quickly once they've returned. Hopefully over those 60-90 additional days they'll leave the money in there and make wiser decisions about what they will do with it. I am in a pickle because I want to leave the money in there, but if I use it as a down payment I could afford more for a beach home when I return. I really hope I can swing it and still leave than money in there.

I doubt the intent of the program is to provide service members with a better investment opportunity for money that they've already had saved or invested.

 

[TSP@ti2de]

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You are correct. I wasn't able to give them a $10K check. I gave them a $5K check at the end of August, 30 days in zone, and another $5K check the first week of September.