TSP - all 15% or only first 5%?

[ggeinec]

I've browsed and searched but I can't find if this has been discussed before . . .

What are peoples' thoughts on contributing the maximum 15%/$15,000 to the TSP vs. shifting some of that contribution, say everything over the first 5% that gets matched, to other investments outside the TSP, like ROTH IRAs, etc.?

Thanks!

ggeinec

 

[EW_ret]

Yes, this has been discussed. Try a search or "TSP or IRA", "401k or IRA", or similar phrase. The opinions vary on how one should invest for emergency funds and retirement. Its prudent to have a balance of tax deferred (TSP/401K, IRA, Roth IRA), taxable accounts (Stocks, brokerage, mutual funds), and emergency funds. My own opinion is:

1. Invest in TSP/401K enough money to get maximum employer match. This is free money.

2. Save in money market, bank account, or other liquid account for emergency. Enough for one month's living expenses initially.

3. Next invest in Roth IRA to maximum allowed ($4,000).

4. Save additional funds in money market, bank account, or other liquid account for emergency. Enough for another month's living expenses, for total of two month's.

5. If 50 or older invest the catch-up in your Roth IRA ($1,000).

6. Next invest in some your taxable accounts, brokerage, stocks or stock funds that are tax efficient.

7. Next, invest additional funds in 401k/TSP to the maximum IRA limits ($15,000).

8. Finally, if 50 or older invest catch-up funds in TSP/401K ($5,000).

 

[tsptalk]

I've browsed and searched but I can't find if this has been discussed before . . .

What are peoples' thoughts on contributing the maximum 15%/$15,000 to the TSP vs. shifting some of that contribution, say everything over the first 5% that gets matched, to other investments outside the TSP, like ROTH IRAs, etc.?

Welcome ggeinc! There are many things to consider. This may be obvious but for those who may not know, one thing to consider is your current tax situation - as in, do you need a tax break now, or later? The Roth is a good idea if you want to pay you taxes now, and get your money tax free at retirement. TSP or traditional IRA's lower your taxable income today but you pay later. Your tax rate may be lower when you retire because your salary should decrease.

Tom