Using the TSP as a supplement to military pension

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cak165

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For those of you who plan or have over 20+ years in the service, do you have any strategies for using TSP as a supplemental savings/retirement vehicle?
 
cak165 said:
For those of you who plan or have over 20+ years in the service, do you have any strategies for using TSP as a supplemental savings/retirement vehicle?
Click to expand...
Simple answer, yes.

A little longer. I am using my TSP and IRA to ensure my retirement is a time where I can finally enjoy life. I cannot depend on SS, and if I am not grandfathered out of this new military retirement plan, I may not be able to depend on my military retirement to provide. Depending on your YOS/paygrade on retirement, your retirement may not be enough to never work again... so, you have to have supplemental income as either a job or TSP/IRA... just my 2 cents.
 
RealMoneyIssues said:
Simple answer, yes.

A little longer. I am using my TSP and IRA to ensure my retirement is a time where I can finally enjoy life. I cannot depend on SS, and if I am not grandfathered out of this new military retirement plan, I may not be able to depend on my military retirement to provide. Depending on your YOS/paygrade on retirement, your retirement may not be enough to never work again... so, you have to have supplemental income as either a job or TSP/IRA... just my 2 cents.
Click to expand...

Thank God for ObamaCare!;):laugh::laugh::laugh: (That was for you, RMI)
 
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Originally Posted by cak165
For those of you who plan or have over 20+ years in the service, do you have any strategies for using TSP as a supplemental savings/retirement vehicle?
Click to expand...


The strategy would be to contribute to it and try to put it where it will earn money(which fund?). Since you get no matching funds, it might be better to investigate other investment vehicles as well.

Thank you for your service. Good luck with the career.

I did retire a long time ago, 14 years, but in my time on active duty I only knew a handful of people who "retired" and didn't have to get a job to continue to live the way they wanted to.

Most were in special circumstances. Examples: O-5 returning to a farm he bought years ago (bet he worked on the farm?), O-4 and O-3E who went home where they had family and a place to live, E-6 who moved to the PI and his in-laws.

All of the other O-4s and above and E-7s-9 I knew or still know worked new careers after "retirement". Me too.

That base pay at the grade you plan on retiring at may look like a fortune now but when the day comes reality will likely set in and you will be looking for a second career. 50% of the base minus BAQ/BAS/COLA is a BIG pay cut. I'm not knocking it, I'm glad I did it, I would change very few things. Just saying that you probably will not stop working when you retire from the US military.
 
I am about to hit 19 years on active duty and plan to retire at the 22 year point, right after my youngest finishes high school. I opened my TSP with a very small contribution (~$100/mo) in 2001 and now put in 10-15% of my base pay (depends if I'm deployed or not). My plan will be to roll this TSP over into a 401K when I retire and start my second career. I feel that my active duty retirement will fund approximately 30% of what we desire/need for the next 20 years, therefore I'll need a second career. In addition to my TSP, I fully fund my wife's Roth IRA and have contributed to a 529 for about 6 years for my sons.

Short story: yes, TSP will supplement my retirement - hopefully I can find a way to roll it into a company sponsored 401K in my next life.
 
I guess what I'm trying to find out are actual strategies for using the TSP as a supplementary retirement fund? I think there was a couple of good answers, I'm trying to figure out whether to continue to contribute to it (figuring out the limitations of the TSP in this market environment), roll it into a Roth or another 401K if I get another job, is there a good percentage to shoot for from the TSP?

Here's what I'm trying to figure out, most financial planners tell us to shoot to replace 80% of our income (or some number that fits our specific situation) so if I end up getting say 50-60% of my income at retirement (65-75% of base) then I would need to come up with 20-30% from TSP or other retirement plans. To get 20-30% in X number of years, I would work out the numbers backwards and see how much I need to contribute and how much risk I need to take, these are the strategy ideas I'm looking for, I actually talked to several financial planners and some with previous military experience and aware of how the system work, but none seem to have a good handle or a well-developed plan, some wanted to sell annuities, some telling me about life insurance needs, and it should be much simpler, or am I missing something?
 
cak165 said:
I guess what I'm trying to find out are actual strategies for using the TSP as a supplementary retirement fund? I think there was a couple of good answers, I'm trying to figure out whether to continue to contribute to it (figuring out the limitations of the TSP in this market environment), roll it into a Roth or another 401K if I get another job, is there a good percentage to shoot for from the TSP?

Here's what I'm trying to figure out, most financial planners tell us to shoot to replace 80% of our income (or some number that fits our specific situation) so if I end up getting say 50-60% of my income at retirement (65-75% of base) then I would need to come up with 20-30% from TSP or other retirement plans. To get 20-30% in X number of years, I would work out the numbers backwards and see how much I need to contribute and how much risk I need to take, these are the strategy ideas I'm looking for, I actually talked to several financial planners and some with previous military experience and aware of how the system work, but none seem to have a good handle or a well-developed plan, some wanted to sell annuities, some telling me about life insurance needs, and it should be much simpler, or am I missing something?
Click to expand...
Easy numbers:
100k pay at retirement (including all benes)
50k in pay (assuming 65% retirement, only base pay, no BAH, etc)
80k goal in retirement (80% you stated)
30k Difference

You will need about 600k in TSP/IRA to withdrawal 5% each year to make up the 30k (after you reach 59 1/2 years of age of course)
If you don't earn any interest in the TSP/IRA, your 600K will only last 20 years. You should earn at least 5% to make up for your distribution.

I can't get into other things like life insurance, health insurance, etc as that would be very specific to you and your needs. This should give you an idea (although you mentioned all of this in your post) of how the numbers work out.

It is simple, number-wise; but you can make it as complicated as you want when you factor in your specific needs and requirements.

The big point is to figure your current income, your military retirement income, and then figure out the difference and calculate backwards to determine how much you need in your supplemental account (TSP or IRA). Figure out how much time you have left to get to that number and then figure out how much you have to add to those accounts each month and then DO IT :D

Good luck !!
 
I retired in 2009 and left my TSP alone and allowed it to grow - and it has. I was considering converting the TSP to a Roth (Conversion IRA) but didn't want to deal with the taxes involved, so I just left it. Thankfully the market has recovered and the TSP portfolio has grown very nicely. I think I'll continue to leave it in TSP. I like the indexed funds, low expense ratio.

I listen to Ric Edelman's radio show (nation's top ranked financial adviser) and several times he's recommended converting the TSP to allow investors to choose from a greater variety of funds/ETFs, etc. I've ignored that.

I don't expect SS to be there for me in 16+ years, so I'll use the TSP - probably won't tap into it until I'm 60-ish. Living off my 23+ yr retirement pension has been more than enough to live off of so far with no major expenses expected except maybe starting Long Term Health Insurance at 55 yrs of age.
 
Thank you for your service. I concur with Edelman. You state you don't expect S.S. to be there in 16 years. I agree, S.S. won't be there in it's current form. I expect reduced benefits, higher taxes, means testing, as ways to keep it solvent. Personally, I'm grabbing my S.S. at 62, to heck with all the advice about waiting until 66 or 70. That said, are you aware the FEDS have borrowed from the G Fund numerous times over the last few years when spending approached the debt ceiling ?? I have no confidence in the FEDS leaving the TSP alone in the future if they are very strapped for funds. Other countries have appropriated their pensions and issued annuities to the holders. I would encourage you to consider rolling your TSP into a self directed IRA, taking it out of the hands of the FEDS and putting it into yours. You'll have much more flexibility in ETFS/Funds and no 2 a month limit in making changes if you wish to do so. There are numerous low fee, good life cycle type funds of there if you just wish to let it ride also...Good luck!
 
Here is another thought... make contingent plans that allow for a variety of possibilities. Taxes and death are sure things, the rest is up for grabs! Collecting TSP on top of early SS until full retirement age will do a couple of things; it will increase your adjusted gross income (agi, therefore tax liability) and reduce your SS benefits (due to early participation). Also, if means testing and other restrictions come into play, your total income may be reduced significantly. While there will likely be some changes to SS, one may wish to position themselves to take the best advantage of the changes by using TSP money (or rollover into another instrument) to cover the stretch between age 62 and full retirement or even delay to age 70. Early participation in SS limits future flexibility in this regard. If one looks at SS as a pension, it may be more easily understood why one might consider waiting for a maximum benefit, expecially considering spousal benefits.

This is even more significat if one is going to work after gov't retirement as SS will deduct $1 for $2 after 15k in income. Then you are paying SS (FICA, increasing your AGI (tax liability) and receiving a permantly reduced SS benefit.

A good start to research these options below : )

http://www.forbes.com/forbes/2007/1112/092.html
 
RealMoneyIssues said:
Easy numbers:
100k pay at retirement (including all benes)
50k in pay (assuming 65% retirement, only base pay, no BAH, etc)
80k goal in retirement (80% you stated)
30k Difference

You will need about 600k in TSP/IRA to withdrawal 5% each year to make up the 30k (after you reach 59 1/2 years of age of course)
If you don't earn any interest in the TSP/IRA, your 600K will only last 20 years. You should earn at least 5% to make up for your distribution.

I can't get into other things like life insurance, health insurance, etc as that would be very specific to you and your needs. This should give you an idea (although you mentioned all of this in your post) of how the numbers work out.

It is simple, number-wise; but you can make it as complicated as you want when you factor in your specific needs and requirements.
Click to expand...

I'd say 80% of your take home. Basically, what do you live on now after all the taxes and deductions etc. are taken out. What goes into your bank each pay day to pay the bills. That's the number you need to try and match in retirement funds available to keep paying he bills. 100% percent or more would make you comfortable, 80% would be doable with slight mods to your budget.

RMI, 100K with all the benefits? I should have stayed in the military :D
 
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