Let me know what you think

[mattdog240]

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I am currently commiting 14% to my TSP. I was thinking of bumping it down to 5%. My reasoning behind this is I also have a ROTH IRA. Wouldn't it be smarter for me to put the max into my ROTH IRAand just get that free 5 % in my TSP? I mean if my money is tax free when with drawen in the ROTH why not right??

Let me know what you think... I am new in the game

 

[Guest]

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mattdog240 wrote:

I am currently commiting 14% to my TSP. I was thinking of bumping it down to 5%. My reasoning behind this is I also have a ROTH IRA. Wouldn't it be smarter for me to put the max into my ROTH IRAand just get that free 5 % in my TSP? I mean if my money is tax free when with drawen in the ROTH why not right??

Let me know what you think... I am new in the game

Welcome mattdog240
It depends on what you can anticipate for your retirement income - will it be higher or lower than your present income (as related to your tax bracket now vs. retirement)?
There are many other issues to take into consideration. Others probably can highlight them better than I can. You can also do a search on this forum for "IRAs" and find out what has already been said and explained.

 

[Guest]

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Hi Mattdog, welcome.

We have "discussed" this before, here is the link:

http://www.tsptalk.com/mb/forum19/724.html

You are right, if you don't draw on it until your 59 and a half, a ROTH makes sense to me. Tax free then. Income then makes no difference. Sorry W_W, don't mean to go against what you said.........actually, yes I do......

Just remember though, there are limits as to how much you can put into a ROTH each year, and it's up to you to keep track of it. You can however have more than one ROTH.

Hope this helps,

Good luck

 

[Guest]

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mlk_man wrote:

Hi Mattdog, welcome.

We have "discussed" this before, here is the link:

http://www.tsptalk.com/mb/forum19/724.html

You are right, if you don't draw on it until your 59 and a half, a ROTH makes sense to me. Tax free then. Income then makes no difference. Sorry W_W, don't mean to go against what you said.........actually, yes I do......

Just remember though, there are limits as to how much you can put into a ROTH each year, and it's up to you to keep track of it. You can however have more than one ROTH.

Hope this helps,

Good luck

Oops, you already mentioned the max, your on the right track. As far as I'm concerned anyway. :^

M_M

 

[Guest]

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mlk_man wrote:

Sorry W_W, don't mean to go against what you said.........actually, yes I do......

Why are you giving me the tongue?

 

[mattdog240]

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Thanks guys and girls! :^

 

[Guest]

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Wonder Woman wrote:

mlk_man wrote:

Sorry W_W, don't mean to go against what you said.........actually, yes I do......

Why are you giving me the tongue?

Oops, sorry, not our 2nd date yet.............:u

 

[Mike]

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Hehehe... thinking back to one of Tom's posts... "two members for the price of one..."

 

[Guest]

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mattdog240 wrote:

I am currently commiting 14% to my TSP. I was thinking of bumping it down to 5%. My reasoning behind this is I also have a ROTH IRA. Wouldn't it be smarter for me to put the max into my ROTH IRAand just get that free 5 % in my TSP? I mean if my money is tax free when with drawen in the ROTH why not right??

Let me know what you think... I am new in the game

Another thing matt, I believe you'll have to pay taxes on any "pre-tax contributions" you made to your TSP if you transfer to a Roth. You will also first have to transfer into a regular IRA and then transfer that into a Roth. All money contributed to a Roth has to be "post-tax". It still works out for the best in the long run.......

If you don't have a lot in your TSP right now, it's no biggie. But if you do, could be a lot of taxes to pay up front...........check with a broker to be sure about this. I'm going through this now with a friend of mine's retirement funds. She only has $5000 total in three different retirement funds so it's not a biggie. I'm not sure how we will know how much tax she has to pay though. I'm thinking when her money gets transfered from her retirement funds, one 403B, one IRA, and one insurance annuity, they will let Scottrade know how much she has contributed pre-tax. Then when we transfer it into a Roth, they will tell us how much.

Also, there is no time frame for transferring into a Roth once you have your regular IRA set up. Once the money is there, you can transfer at anytime.

Good luck,

M_M

 

[Spaf]

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mattdog240

I contributed money to TSP. And it was shear dumb luck that it wasen't all wasted in the stock market wars and ignorant allocations. There are over 3 million participants in TSP.
Stay tuned, educate yourself, know how the system works, otherwise we will all be needing the Chaplain! Cause I put the TSP system and empty boots on the same page.

 

[Guest]

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The Roth is much wisdom. However, the TSP doesn't charge to move money around (yet). Also, it is often better to work your tax money now, and likely pay a lower tax rate upon retirement. Plus, you can borrow against it if you absolutely must. Once you give it up to the tax man, is hard to get it back. $$$ Probably a matterto discuss with a professional as part of your overall retirement strategy. :u

 

[Spaf]

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Mattdog240

TSP has employer matching grants up to what is it 5%. That is hard to beat and not something that an IRA has. I am sure you can find a financial professional somewhere, maybe yes, maybe no. I heard that the rich and famous have their money mannaged by professionals, but can you afford that?

Why don't you become the professional? It's your soul, it's your money, and it's gonna be your retirement some day.

 

[Guest]

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First off - how do I sign up for the tongue thing? I have postage stamps that need licking.

Better to max the TSP. Take the tax cut now. Would be a bummer five years from now we are on the flat tax and your lose the tax cut now.

Get my drift? I do not have time to explain now. But the flat tax will be on what you consume buy so you will lose your tax cut now and later on you will have to pay tax on what you purchase later.

:shock:

 

[mattdog240]

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All good ideas but now you are confusing me. Is there anyone that is in my boat. I have my TSP @ 5 % and I have a seprate ROTH IRA that I am putting the yearly max in. The roth IRA has about $10,000 mixed in with mutral funds. All good ones, five stars, with 5yr returns of 11% or more..ect ect So does anyone think this is a good idea to keep going down this road at my old age of 25, or should I put more into my TSP?

 

[coolhand]

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Mattdog240,

Here is a different angle and one that I go by. I am contributing the maximum amount to my TSP (14%). I did that as soon as I started my TSP accountso I wouldn't get used to having any extra money laying aroundas itmight get spent instead.I also have a ROTH, although it's a little difficult for me to max it out at the moment.

However, since I am already contributing the maximum amount to the TSP, any pay raises I get or promotions can be used to immediately fund other savings vehicles such as the ROTH. You see, I want the best of both worlds. It may require you to lower yourstandard of living somewhat, but once you get used to a set income, it gets easier.

I actually prefer to max out my TSP before the ROTHfor another reason.I have a lot more control over it. The tax advantage of the ROTH may not be able to offset the money you could make in the TSP, taxes or no taxes. (I really don't think it can come close if you know what you are doing).

Additionally, five star ratings are never a guarantee of future earnings. The rating can fluctuate over time due to many factors (i.e. change in fund manager, market conditions as they affect a given market sector, etc.).

Another lesson I learned not too long ago concerns mutual funds. Specifically,what they are costing you.Many financial institutions charge a pretty good fee (5 - 6% typically) to contribute new money, not to mention annual operating expenses. I gave that up a few years back because for far too many funds itis a steep hill to climb. I nowinvest with no loadfunds like Vanguard.You may already be doing this, but I thought I'dbring it up anyway since I'm on a roll .

Oh yeah, one more thing. MarketTimer has a real good point. Tax laws change. I know, I used to be a tax consultant. Don't go by the current tax law situation. It'll change many times before you have a chance to retire.

 

[neirbod]

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Coolhand,

FYI, in 2005 the max percent contribution for TSP is bumped up to 15%. I believe there is another week or so of TSP open season, so you can still make the adjustment if you want. Hope this doesn't complicate your strategy!

Dave

 

[mattdog240]

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Ya you guys have me thinking now. I am going to put it at 10% and see if I can even do both my ROTH IRA and TSP and live happy. I currently have 50% IN C and 50% in S. New question now... I am looking to be aggressive and I know G isn't for me. What about I??? Maybee I will dip into that too..

 

[Guest]

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It may not be so much a matter of how aggressive one is, but rather how adept and shrewd. Read here daily, use other resources that you will learn to use, then make your decisions based on your goals for retirement, your risk tolerance, market trends and technical analysis. Try to make your decisions based on strategies you will develop or follow rather than emotion, but you will occasionally need to follow your gut. Then there is luck.

And overall, almost any effort to manage your TSP will produce better results than the G fund. If you follow M_M, MT and TspTalk's daily analysis, not to mention the apt research and reflection of Smedlap, W_W, Spaf and Coolhand, their diversity of opinion and insight will surely put you on your way. <><

 

[coolhand]

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neirbod wrote:

Coolhand,

FYI, in 2005 the max percent contribution for TSP is bumped up to 15%. I believe there is another week or so of TSP open season, so you can still make the adjustment if you want. Hope this doesn't complicate your strategy!

Dave

I'm glad you brought that up Dave, you are absolutely correct :^. I changed my contribution to 15% in October just so I wouldn't forget.It won't take effect until the first pay periodof thenew year (or right around there). That's a great time for it to happen because that's when we typically get a pay raise.Increasing our contribution at that timeusually doesn'treduce our current disposable income. In fact, I usually have something left over.

Good catch!

 

[Guest]

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mattdog240 wrote:

All good ideas but now you are confusing me. Is there anyone that is in my boat. I have my TSP @ 5 % and I have a seprate ROTH IRA that I am putting the yearly max in. The roth IRA has about $10,000 mixed in with mutral funds. All good ones, five stars, with 5yr returns of 11% or more..ect ect So does anyone think this is a good idea to keep going down this road at my old age of 25, or should I put more into my TSP?

Matt, I'm with you ............as long as you actively manage your Roth once in awhile. You can make a lot more money in your Roth by playing inverse and 2X funds..........And the 5-6% fees? Never seen any funds that charge that much.. I only play the funds that track the indices...........are you actively moving things around in your TSP or are you just a buy and holder. Does make a difference. Remember, after you turn 59 and a half, you can take money out of your Roth at anytime tax and penalty free. Also, if you leave the TSP in the future and decide to roll it over into a Roth, you'll have to pay taxes on every dollar you put in your TSP that was tax deferred. I'd stick with 5% in your TSP, and 10% in your Roth even if your buy and hold. Lots of funds out there to invest in. This year a REIT (real estate) would of been a good one. Just have to do your homework. If the markets down in TSP, all we have is F and the stinkin' G. I hope one day we might get an inverse fund.........

Good luck,

Mike