Retirement Planning - TSP of Roth IRA?

[Rolo]

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Mike wrote:

With TSP, our only protection against a bear is G and F - which are limited in returns to 6% or so in that environment (which is not much!). With a Roth, you could find funds specifically meant to make money in bear markets.

D'oh! I forgot about that one! Yes, that makes the case for the Roth if you are investment-savvy enough to benefit. See, I like arguing...I learn stuff. Iron sharpening iron.

Truth be told: I will be in this situation next year and am beginning to strategise what I want to do with my TSP/Roth/Traditional contribs.



azanon wrote:

Second thing i have to disagree with Rolo on, is that in most cases,

HeeeeeeeeeeeeeeEEEEEEEEEEEEEEEeeeeeeeeeeeeeeeeyyyyyyyyyyyy Az!!!

I wonder where you've been....glad to see you back...you were missed.

 

[azanon]

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:dude:Haha, i just couldn't let you down Rolo. :u

 

[azanon]

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If you think tax reform will go through then you would want to work on the TSP. Why? When tax reform goes through you will lose the tax deduction. So if you are in the 25% tax rate...you will lose the 25% "return" of being able to deduct it against your taxable income.

What if taxes go the other way to pay for all this mess we're making in Iraq and other places of the world? Its a gamble regardless of how you play it. If you go for TSP, and the tax rate doubles by the time you retire, guess what pal, you lose bigtime (compared to the individual that dumped his retirement monies in Roths).

 

[Guest]

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The Iraq mess is being funded by our treasury sells to countries like China, Russia and Japan...once they stop buying then things will get real ugly...

do not befooled the U.S. is not paying for anything...it is all going until the old credit card...eventually we will have to start to pay....the budget this year is $430B in the red....that does not count the $80B that will be asked for by the Blanco Casa next week and the 2T that will need to be floated so the brokerage houses can get 1% off social security reform....

Two classes....rich and poor....

 

[Mike]

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Which is precisely why you hedge your bets and invest in both...

Taxes won't be going up under this president. He only cuts rates and borrows to compensate (bye bye dollar strength). We'll see what he does with the spending levels in his budget proposal - that's the part of the equation to watch closely.

I think long-term, federal spending growth will slow to a crawl and/or tax rates will rise a bit. Our national debt is simply growing too large and needs to be brought under control - otherwise we will be faced with a perpetually weakening dollar, which isn't good for the long-term health of the world economy.

 

[Guest]

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azanon wrote:

If you think tax reform will go through then you would want to work on the TSP. Why? When tax reform goes through you will lose the tax deduction. So if you are in the 25% tax rate...you will lose the 25% "return" of being able to deduct it against your taxable income.

What if taxes go the other way to pay for all this mess we're making in Iraq and other places of the world? Its a gamble regardless of how you play it. If you go for TSP, and the tax rate doubles by the time you retire, guess what pal, you lose bigtime (compared to the individual that dumped his retirement monies in Roths).

Guess what Pal? When tax reform goes through...you will lose the deduction on your TSP contributions but on the other side when you take the money out it will not be taxed. So in my mind it makes more sense to fund the TSP.

Because you "earn" the 25% write off now and on the back end you will not be taxed. So if you chuck the money into the ROTH you lose the 25% and the tax free treatment will be lost because incomes will no longer be taxed.

Make sense??

I am not a gloom and dome guy but you have to take what they give you and do the best for yourself with the info ya got.

Good luck out there.

 

[Guest]

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Mike wrote:

Which is precisely why you hedge your bets and invest in both...

Taxes won't be going up under this president. He only cuts rates and borrows to compensate (bye bye dollar strength). We'll see what he does with the spending levels in his budget proposal - that's the part of the equation to watch closely.

I think long-term, federal spending growth will slow to a crawl and/or tax rates will rise a bit. Our national debt is simply growing too large and needs to be brought under control - otherwise we will be faced with a perpetually weakening dollar, which isn't good for the long-term health of the world economy.

Mike,

Your tax is increasing...got your property tax statement yet....15 states will be increasing their sales tax this year....it is like being a frog in the hot water....by the way the national sales tax will be on top of state taxes....since the rich will not longer purchase municiple bonds (tax free) that will mean states will have to increase their taxes to make up for that loss. States like Florida, Texas and CA will have to increase their taxes by at least 10% because they float a lot of municiple bonds. I believe CA has 50B in the float right now....the rich will dump those to purchase the higher currently tax income securities because they will not longer be on income...so they will not need to shelter 90% of their wealth.

Mike, sorry if I was rude...but I see what is coming....it is going to be very, very hard for the hard working middle class...

You have good posts here I did not mean to anger you.

 

[Mike]

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Assuming that major tax reform will get through Congress is a reach at best. Most of the population earns less than $100k per year, so anything that is negative for this group is highly unlikely to make it through - because the voters would realize the raw deal they are getting after it is implemented and vote the guys out who voted for it in the first place.

The consensus opinion that I have been hearing on the political shows lately is that *something* will get through and it'll be limited. A flat income tax rate appears more likely than a sales tax due to the regressive nature of the latter system.

Beyond this, the major troublesome issues on the budget and taxation issues are what happens with social security and medicare. Both of those cost a ton of money, and with more people retiring, their funding sources will shrink as the number of beneficiaries grows. This - not Iraq - will be the long-term driver of government tax rates and spending in the future. Based on voting patterns, I'm not at all optimistic. Older people vote in large numbers, and they will do what they have to in order to protect their benefits. This will translate into higher payroll taxes - which none of us can escape, even with retirement witholding. :shock:

As for my tax rates, they aren't doing anything - I'm a renter and my share of property tax is negligable. My rent rate only went up 2%.

 

[azanon]

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My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).

 

[pyriel]

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azanon wrote:

My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).

Funny how next year is a different story where the max for TSP jumps considerably. The thing is there are many others who will not be able to max out both due to their enthusiasm in satisfying their extrinsic requirements. They live for today without ever thinking about tomorrow. In Texas, I believe, they call that "big hats but no cattle." I learned that lesson two years ago and I vowed to get out of this rat race in 10 years. So far, i'm on course and can't wait to finally look at myself in the mirror, someday,and say "I made it."

 

[Guest]

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pyriel wrote:

azanon wrote:

My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).

Funny how next year is a different story where the max for TSP jumps considerably. The thing is there are many others who will not be able to max out both due to their enthusiasm in satisfying their extrinsic requirements. They live for today without ever thinking about tomorrow. In Texas, I believe, they call that "big hats but no cattle." I learned that lesson two years ago and I vowed to get out of this rat race in 10 years. So far, i'm on course and can't wait to finally look at myself in the mirror, someday,and say "I made it."

These days they call it "big truck, no ranch". :^

I'll meet ya for Mai Tai's in the Bahama's in 8 years...........

 

[Mike]

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Heh. I live for tomorrow at the expense of today. Maximum TSP + maximum Roth IRA investment leaves not a whole heck of a lot in the way of "fun money". :shock:

Thankfully, I am able to offset that a little bit by working 24-32 hours of OT per month.

 

[azanon]

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I live for tomorrow at the expense of today. Maximum TSP + maximum Roth IRA investment leaves not a whole heck of a lot in the way of "fun money".

That's my problem. If it was completely up to me, i'd come up with the money np. But, alas, i'm married and getting my wife to see the light isnt so easy. She comes in the door and unloads a wadful of store receipts by the checkbook. I really want to ER, but i also want her to be happy. Trying to do both is very tricky and takes a lot of training (for her) and sacrificing on my part. But instead of working more, like Mike, I just try to make up for it by not getting a heck of a lot for myself.

 

[Gritz]

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pardon the interruption, but while you are on the subject of roth and ira, would any of you care to provide insight into dividend paying funds that you can invest in with your roth or ira, knowledge of or experience in; i relaize this fits in the Investments Portfolio topics as well, but thought while you folks were in engaged in this line of thinking..., plus i was given some retirement advise to look at these funds and i'm really a novice in funds, so any info is helpful, thanks.

 

[azanon]

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Maybe just start a new thread with that question. That way people arn't tempted to go onto another subject with little/no relation to the TSP vs Roth issue.

 

[Gritz]

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thanks azanon, i posted a new topic as suggested.

 

[Rolo]

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azanon wrote:

That's my problem. If it was completely up to me, i'd come up with the money np. But, alas, i'm married and getting my wife to see the light isnt so easy. She comes in the door and unloads a wadful of store receipts by the checkbook. I really want to ER, but i also want her to be happy. Trying to do both is very tricky and takes a lot of training (for her) and sacrificing on my part.

Hey Az, my g/f says, "Take...the checkbook...away...and the credit cards." heh. Yes, I say make a financial schedule and put her (and you) on an allowance.

I was just thinking what my g/f just said, "If she's shopping that much, then she may not be happy anyway." I have to agree that maybethe focus should move to more intrinsic happiness.

And if talking doesn't work, break out the paddle! :shock:



As for me, I invest heavily during up-markets and do a little shopping during lulls/down markets, but always fully fund my retirement accounts.

 

[azanon]

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Well, Rolo, speaking generally its not that she spends too much. If you compared her to the average american, she's probably more on the frugile side. But us "ultra savers" are anything but status quo. So i do fully realize i'm asking her to be far more frugile than your average Joe.

I didnt manage to max my retirement accounts last year, but you have to remember, for me (us) that's a lot of money. Look at this year. 15% of what i make (TSP) is 10K dollars. Two, fully funded IRAs is another 8K. So that'd be 18K dollars just for retirement accounts alone you're suggesting i "always" fund. On top of that, my wife's new job might also have a matching 401(k), so my total retirement fund options could be pushing well past 20k/year. Ok sure, i'm going to actually try to pull that off, but that's hardly normal if i manage it.

That's to say nothing of various other "savings" we all need (emergency funds, larger upcoming purchases (such as a car), home repair, home improvement, college funds, on and on)

 

[jgpalmerdds]

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Rolo,

So you max out your TSP and your Roth IRA each year? I used to be able to do this while in the private sector, but not now.

Joel

 

[zbwmy]

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At your age it's tough to do both. If you have 6% in now put another 1% in each Jan. when we get our raises. See if you can also match that in the Roth until you max out the annual contribution. Remember when you retire the money in your Roth is ALL yours.