spouse vs spouse contributions

[mailmanusa]

Consider that a husband and wife both contribute to the tsp and both are under FERS, and both have the same base pay and years of service remaining. Combined they cannot afford to put in more than 10% from each of their own salaries into each of their own TSP funds.

As a pair operating with a common goal, are there any benifits in chopping up the contribution amounts between them? For instance. Having one put in 5% and the other 15%.

 

[fabijo]

The only difference I can see is if the two spouses play with their TSP accounts differently. In that case, putting more into the better investor's account would make sense.

And, of course, you would want each to put at least 5% to get the matching contributions.

If everything is the same, it really wouldn't matter how you split it. If you both invest the same, getting 1% within each is still just 1% of the sum total. Following is how you can see that (if it's not too confusing).

If x is her account and y is his account, and a is the % return that each account received, then let x1 = her account after the return is added and y1 = his account after the return is added. Here is what you would get:

x1 = ax + x = x(a + 1)

and

y1 = ay + y = y(a + 1)

Their new sum total = x1 + y1. Now it doesn't matter how much is in either account before the gains, because:

x1 + y1 = x(a + 1) + y(a + 1) = (a + 1) * (x + y)

It doesn't matter if x = 500,000 and y = 500,000 or if x = 900,000 and y = 100,000. The new total will still equal (a + 1) * 1,000,000.

I hope that made at least some sense.