Maxing out contributions to the extreme, couple of questions

[Hybrid93Hatch]

I have been contributing $635 a pp for just over a year now. I am now in a very good financial situation where I can contribute a larger dollar amount to my TSP. You always read the earlier / more you contribute to a 401k plan, the more money you will have down the road. With that being said, I have been thinking about bumping my contributions to a $1,000 a pp or more for the first several months of the year. Of course I would have to taper the dollar amount back toward the end of the year to keep the contributions at $16,500 for the year.

My questions are:

1) Will heavy front loading my TSP using say PP 1-10 @ $1,000 each pp & PP 11-26 @ 406.25 each pp have a benefit over the flat rate of $635 each pp over the course of 16 years? I may be able to bump the amount up even more from the start, but I would have to make sure that I can contribute at least 5% at the end so I am not missing out on the gov's matching contribution.

2) Does the TSP contributions reset January 01 or October 01?

Thank you for any help advice.

 

[novice]

My questions are:

1) Will heavy front loading my TSP using say PP 1-10 @ $1,000 each pp & PP 11-26 @ 406.25 each pp have a benefit over the flat rate of $635 each pp over the course of 16 years? I may be able to bump the amount up even more from the start, but I would have to make sure that I can contribute at least 5% at the end so I am not missing out on the gov's matching contribution.

2) Does the TSP contributions reset January 01 or October 01?

Thank you for any help advice.

1. There is a benefit to heavy front loading, albeit quite small. The benefit comes from compounding interest. You'll be earning interest on $1000 vs. $625.

2. I cannot say absolutely, but I would say Jan 1. The reason is, this annual contribution limit is set by the IRS not D.O.D.. The limit is tied to your tax year which in most situations is Jan 1 to Dec 31.

 

[jpcavin]

If you max out too early, you will not get agency matching of 5%. The agency matching stops when you reach $16,500.

 

[Frixxxx]

I have been contributing $635 a pp for just over a year now. I am now in a very good financial situation where I can contribute a larger dollar amount to my TSP. You always read the earlier / more you contribute to a 401k plan, the more money you will have down the road. With that being said, I have been thinking about bumping my contributions to a $1,000 a pp or more for the first several months of the year. Of course I would have to taper the dollar amount back toward the end of the year to keep the contributions at $16,500 for the year.

My questions are:

1) Will heavy front loading my TSP using say PP 1-10 @ $1,000 each pp & PP 11-26 @ 406.25 each pp have a benefit over the flat rate of $635 each pp over the course of 16 years? I may be able to bump the amount up even more from the start, but I would have to make sure that I can contribute at least 5% at the end so I am not missing out on the gov's matching contribution.

2) Does the TSP contributions reset January 01 or October 01?

Thank you for any help advice.

1) Putting money in your 401K early allows you to have it done, but the question of front loading your year only make sense if you are trying to ride a cyclical investment strategy. If you think the markets are better in the first 6 months and taper off later, then yes, it makes sense to take advantage of the strategy. If you have the ability to invest so much, I recommend looking at off-setting your tax footprint with a Roth IRA. Keep your TSP contributions even and use after tax dollars to go to a Roth IRA for free money when you retire.
2) Contributions are based on the tax year, not fiscal~~good call novice.

Good Luck, and if you choose to do your front-loading, let us know how it goes! Maybe a back-tester could provide insight if this would have worked in past years?

 

[alevin]

1. There is a benefit to heavy front loading, albeit quite small. The benefit comes from compounding interest. You'll be earning interest on $1000 vs. $625.

I've thought about doing it that way myself, but hadn't figured out the compounding interest advantage. thanks for that tidbit. the other advantage is you have more earlier to do your trading with, however you do your trading. OTH, you have more to recoup if your trades go wrong early in the year-but that's true in any case.

 

[Scout333]

Hello Fellow TSP'rs, Considering increasing contributions to my retirement fund(s). Trying to decide between adding to TSP vs. opening a Roth IRA or regular IRA. Many of you have mentioned that you have moved all or part of your retirement funds to Roth or regular IRAs. What are some of the pros and cons of adding to TSP vs opening a Roth or regular IRA? Also, do you have suggestions for brokerages to handle your IRAs? Thanks for your help!

 

[Frixxxx]

Hello Fellow TSP'rs, Considering increasing contributions to my retirement fund(s). Trying to decide between adding to TSP vs. opening a Roth IRA or regular IRA. Many of you have mentioned that you have moved all or part of your retirement funds to Roth or regular IRAs. What are some of the pros and cons of adding to TSP vs opening a Roth or regular IRA? Also, do you have suggestions for brokerages to handle your IRAs? Thanks for your help!

TSP vs Roth IRA
It really comes down to taxes and desired goals.

Read that thread, there is some valuable advice...
I know TSP said it would stand up a ROTH, but we're still waiting.

 

[bmneveu]

1) Will heavy front loading my TSP using say PP 1-10 @ $1,000 each pp & PP 11-26 @ 406.25 each pp have a benefit over the flat rate of $635 each pp over the course of 16 years? I may be able to bump the amount up even more from the start, but I would have to make sure that I can contribute at least 5% at the end so I am not missing out on the gov's matching contribution.

My suggestion would be to stay at a flat rate until the market is in a large dip, and then dump 100% pp into it for the best gains when the market comes back up. This is assuming your contributions go into a stocks fund, and assuming you are stable enough to not need a paycheck or two back to back.

 

[Viva_La_Migra]

TSP vs Roth IRA
It really comes down to taxes and desired goals.

Read that thread, there is some valuable advice...
I know TSP said it would stand up a ROTH, but we're still waiting.

The problem with a Roth is the Dems can't tax and spend it...yet.

How much you wanna bet they will try to tax the "capital gains" from Roth accounts at some point?

 

[Scout333]

TSP vs Roth IRA
It really comes down to taxes and desired goals.

Read that thread, there is some valuable advice...
I know TSP said it would stand up a ROTH, but we're still waiting.

Thanks Frixxx