Looking for advice

[Miketurk]

Hello all and thank you for taking the time to review my post.

I am a former military service member turned federal employee who unfortunately did not start investing until last year. Understanding my mistakes in the past, I am starting to get very serious with my investments and personal finances. Here is my current situation:

Age: 30 Goal retirement age: 58 1/2
GS-11 step 3, 2210 series (IT Specialist)
Salary: 65864
Current TSP balance: 7790.57
Investment fund: L2050
Percentage: 5% traditional

I make an additional $22k/yr in VA disability, but that will likely grow to 38-40k here in the next two weeks. My wife does not work, so my income is all that comes in. We never live paycheck to paycheck and always have a surplus of $1K+/mo after bills and other "expenses" aka shopping.

Am I on track for success with my TSP? Would anyone recommend I tweak anything to be better? My long-term goal after catch-up contributions is obviously to have $1 mil saved up. Between VA disability, FERS retirement, and social security (if still existing), I think we will be set in retirement years. TSP will just be a nice savings to have on the side.

[Miketurk]

I forgot to mention, my contribution plan going forward is to increase my contributions by 2% every step increase, and possibly 1% every annual raise granted by the president (usually 2.1%).

[ksmoly04]

Hello, and welcome!

Lots of knowledge and experience on these forums that will chime in shortly. I would point you over to the "Seasonal Musings 2017" thread as that explains a lot of the strategies that many on here follow.

I'll defer to better number crunchers than myself regarding your "are you on track" question. Again, welcome!

[evilanne]

TSP has quite a few calculators that can help you determine how much to save, comparing traditional vs Roth options, etc. https://www.tsp.gov/PlanningTools/Calcu ... index.html
To get to $1M, I think you should probably increase your contribution rate sooner rather than later, especially if you already have money left over at the end of the month. Since you already have some tax free income through VA, you might want to consider opening a Roth on the outside for you and your wife so that it will grow tax free and won't be taxable when you take it out (You can still make contributions for 2016 (limited to $5,500/yr/person <50 for each of you) if done prior tax filing due date).

[cb3]

With your va disability tax free and your wife not working, you may look at how much of a tax savings you're getting by traditional tsp compared to Roth. I'd venture to say if you are not looking at a buy and hold in the bond funds a move to Roth could turn out to be more money in your pocket in retirement. Would really depend on how much of your retirement is taxable, but we switched to 10% Roth last year after comparing our future taxable income in retirement. Made much more sense to pay taxes now for us and pay nothing on that portion of our earnings in the future

[crondanet5]

Get out of the L Funds. Look at the YTD Leaders to learn what they invest in. And look at the top Fantasy Players by Account Balance to see how they got their fortune. You are in a race to gather as much money in your retirement account as you can. Max your contribution now. Don't pussyfoot the 1% 2% game. Get in feet wet and maximize your returns. I want to see you in the top 5 Leader list.

[Buckeyedog]

Like evilanne said above, since you have the VA stuff helping out, jump up those contributions much faster than what you have outlined. The earlier the better. And honestly, I'd probably go with an all stock mix instead of the L fund. Maybe like a 60/20/20 C/S/I. No need for G or F for your current situation.

[skiehawk11]

Hello all and thank you for taking the time to review my post.

I am a former military service member turned federal employee who unfortunately did not start investing until last year. Understanding my mistakes in the past, I am starting to get very serious with my investments and personal finances. Here is my current situation:

Age: 30 Goal retirement age: 58 1/2
GS-11 step 3, 2210 series (IT Specialist)
Salary: 65864
Current TSP balance: 7790.57
Investment fund: L2050
Percentage: 5% traditional

I make an additional $22k/yr in VA disability, but that will likely grow to 38-40k here in the next two weeks. My wife does not work, so my income is all that comes in. We never live paycheck to paycheck and always have a surplus of $1K+/mo after bills and other "expenses" aka shopping.

Am I on track for success with my TSP? Would anyone recommend I tweak anything to be better? My long-term goal after catch-up contributions is obviously to have $1 mil saved up. Between VA disability, FERS retirement, and social security (if still existing), I think we will be set in retirement years. TSP will just be a nice savings to have on the side.

Well, this is generic advice, but:
1. No debt other than a mortgage. If not, reduce debt before investing over the 5 percent match;
2. Have 12-18 months of bills saved up in a money market, TIPS, or other short-term fixed income security. If not, build up liquidity first before investing over the 5 percent match;

If you meet the above criteria, the general rule I try to live by is to invest 15-20 percent of my gross pay, but take home may be easier for most. If you don't plan on touching any investments until retirement, I'd just work towards maxing out your TSP and a Roth IRA.

Specifically regarding the TSP; if you have more than 20 years before retirement, I'd recommend dollar cost averaging the S Fund 100 percent. I'd also roll everything to the Roth TSP.

Here are a few tools:
https://www.portfoliovisualizer.com/monte-carlo-simulation

https://portfoliocharts.com/calculators/

[cb3]

Big thing to remember, the faster you can grow your account with contributions the longer those contributions can work for you. You will NEVER see anyone post that they wish they had invested less money when they were young. Go hard now.

[ArrieS]

Here's a suggestion if you work for a DOD agency. Try the CEW program, deploy for a year to Afghanistan and triple your salary. You can max out your TSP easy at $18,000 and have a lot left over for investing in an IRA and a taxable account.

Of course, I don't know your situation, but going this route would allow you to stash away a lot in a short period of time.

[cb3]

Good post from skiehawk11 regarding debt. Get rid of your debt if you have any, pay off any cards and pay off your cars. If you're sitting in a 30 year va mortgage get ahead on that as well. I personally don't feel comfortable in anything longer than a 15 year mortgage.

[cswift01]

Whatever you do max out your TSP. Its almost impossible to beat the cost of that account vs. an index fund.

Best,

Me

[Miketurk]

Thanks everyone, I appreciate the advice! Our debt looks like this:

1 credit card with a $3300/5000 balance (will pay off this year)
1 line of credit with $200/1000 balance (will pay off in next 30 days)
1 car payment with $4400 remaining (paid off by December of this year)
Wife has $4200 remaining in student loans (hoping to pay off this year)

$3100 in available savings. Definitely not enough for 12-18 months of expenses. We will probably need this for closing costs for a home. No Mortgage yet; however, we are looking at working with a realtor and buying within the next 90 days. Looking to spend no more than $200k on a 30 year VA loan.

[crondanet5]

Get a house with an attached 2 car garage, basement, and a laundry area off the kitchen. Then we'll talk upgrades to make it a castle.

[rcozby]

Be sure to get a utility sink in the laundry area...I really miss that.

Also, good that you're thinking CUC so early; even better to do something about it. That $6000 per year for eight years is a hefty wad, but it's well worth doing. You have 20 years to make it happen, so start putting that $200/month in a safe place so it's ready when you need it.