Beyond TSP

[Finsfan]

Is there any major advantage to having investments outside of TSP?

If so, any recommendations?

Currently, I'm 100% TSP L2040.

[skiehawk11]

The main reasons are increased flexibility of trading and which securities you'd like to trade.

[crondanet5]

Perhaps the most important reason for investing outside the TSP is that you are creating an after tax account to draw against while waiting for your TSP account to greatly increase in value in a tax deferred status until you reach age 70.5 and must begin making calculated withdrawals to avoid paying the IRS a penalty for not making the minimum withdrawal at that age. This is huge. Your TSP account should be looked at as a multi-generation account because its value can continue to grow after age 70.5 and hopefully forces you to make bigger minimum withdrawals each successive year thereafter. So you don't deplete it: you pass it on to your children. This is huge. Your TSP account, adroitly managed, can mean a lot to you and your heirs. So you don't want to touch it. And you need to plan for 17 years of annual expenses beyond age 70. That's not easy, but assuming you remain in government employ and Congress does not fool with the government pension system, and Social Security is still there, and you combine those 2 life income streams with a healthy taxable investment account, you should have a great financial retirement. I heard Warren Buffet's son say that you have 40 years to accomplish something in your life. Assuming you are not going to bring lasting peace to the Middle East or cure cancer, the next best thing you can do is pay off the national debt with your capital gains tax from your taxable investment account while creating the necessary wealth to pay expenses before age 70.5. Da soona da betta. Comprende amigo?

[Finsfan]

Crondanet5,

Thanks for the great advice!

What are your non-TSP investments?

[nittney]

I am in the same situation. I am now able to max out my TSP. I also have a Roth IRA for myself and my wife. Besides that, I have a brokerage account but have not purchased anything as of yet. Just a little $$ sitting on the sidelines. I just recently subscribed to www.alphaprofit.com and they have some pretty good investment recommendations. They recommend certain mutual funds, ETF's and stocks. My friend has been using them for quite some time and he said his time spend doing the daily trading research is now over. He is very happy with them. I too, am open to recommendations on where to put this money on the sidelines.

[wwwtractor]

Two things you cannot buy in TSP are real estate and precious metals. They may be at bargain prices on occasion and you can always count on inflation to drive them up forever at this point with the national debt approaching infinity. As mentioned, the Roth IRA is a good choice with no taxes in the future which may be a significant factor.

I personally like Fidelity Investments with their over 60 commission free ETFs.

[Finsfan]

How do you guys feel about Vanguard?

They seem to have some very inexpensive mutual funds that are also productive.

[Jock14]

Is there any major advantage to having investments outside of TSP?

Here's a few reasons I can think of:
1) You max out your TSP contributions and would like to save more
2) Less rules on an "outside investment" (as far as trading goes- more funds/IFTs)
3) Another option to withdraw from. TSP allows you a ROTH option, but the government's matching is always regular. You have to withdraw 50/50 (ROTH/Traditional) from TSP. That means 50% of your income (assuming it's all TSP) is taxed. If you have a ROTH IRA (or similar account), you pay taxes now and help drive down the taxible portion of your income later.
4) More control/accessibility. For example: if you need access to some funds for a medical emergency, kid's college, etc. Sometimes in an outside fund, part of your account is available. If you have access to that, you don't have to do a TSP loan. My understanding is during a TSP loan, you cannot donate, but have to pay it off first.


That's just off the top of my head based off what my financial advisor and I have discussed. I am NOT a financial advisor and may be slightly mis-informed. There are a number of people on this site better informed than I am, so they might be able to help more...

[dcramer29]

First I would pay off your house...if you still have a mortgage.

[skiehawk11]

There are a few suggestions for you depending on your age and projected retirement date.

1. Meet the 5% matching in the TSP. Not doing that is just throwing away free money.

2. If you want more flexibility, open a Roth/Traditional IRA account. This depends on your situation in terms of taxes. Generally though, a Roth has more advantages. I would talk to a fee for service investment adviser and I'd preferably talk to someone who has CFA and/or CMT designations. They can give you a solid foundation to build on.

3. After maxing out your 5% matching and your individual IRA account, I suggest one of two methods. Paying down all your debt including mortgage. This of course depends on a few factors. For instance, if you are lucky enough to have a low interest rate (under 5% fixed), I would focus on a debt reduction plan. I've found the following sites to be extremely helpful:
* https://www.readyforzero.com/
* http://unbury.me/

4. If you have low debt payments and low interest on those payments (under 10% of your take home pay) then I'd focus on contributing more to your TSP.

5. I am a big proponent in relative strength. It's simple and easy and generally worry free. I'd use Fidelity, Vanguard and TD Ameritrade IF you can abide by the rules for commission free trading. Generally, it means you have to stay within a fund for a month before trading out. If not, the fees can become quite high!

Altogether, I suggest that you talk to an adviser and get some knowledgeable guidance. Just don't depend on your adviser. Use them like a tool. In the end, you alone are responsible for your finances/retirement.

Keep posting questions on TSPCenter!

[skiehawk11]

Oh, and I am waiting for the next HUGE drop in the market. I'm increasing my cash hoard currently. When the market gets pummeled, I'm stepping into my DRIP plan on some solid dividend stocks and just stick there. In 30 plus years with compounding and time working in my favor, I should have a solid dividend portfolio.

[RGEN]

Enlighten me some. I seems that the periodic crashes were brought on by something else crashing; real estate, dot coms, financial. With your keen historic eyesight can you confirm? And if that is the case what is the current building bubble?

[skiehawk11]

RGEN,

Anything could be the next big thing. Some things that I am keeping an eye are:

* Bond market
* Student loans
* Reinsurance market

[Winner]

Finsfan, you may consider and while you learn about options.

I received this from Fedweek Retirement & Financial Planning Report dated 4/30/2009

Option Play
--------------
Academic studies support the use of an S&P 500 "buy-write" strategy. Here’s how the process works:

* You invest in an S&P 500 index mutual fund or exchange-traded fund (ETF).
In essence, you’re buying the stocks in that index.

* You sell "covered calls" against the index. The buyer of these options can buy the index from you at given price. As an options seller, you get cash upfront but relinquish the chance of significant gains.

Research indicates that call options are usually overpriced. Thus, sellers of calls generally do better than buyers of calls. Those who sell them tend to make more money than those who buy.

One study found that a buy-write strategy would have generated a 13 percent profit over the past 10 years. Investors who simply bought and held the S&P 500 would have lost 2 percent. Moreover, the buy-write strategy has not been as volatile as a buy-and-hold approach.

Implementing a buy-write strategy on your own is not easy. However, you can buy ETFs and exchange-traded notes (ETNs) that replicate the strategy for investors:
They include iPath CBOE S&P 500 BuyWrite Index (BWV), IQ Investor Advisors' S&P 500 Covered Call Fund (BEP), and PowerShares' S&P 500 BuyWrite Portfolio (PBP).

("Those who sell them tend to make more money than those who buy." I trade options daily so I agree that average about 33% options made money with 66% lost because time kill the premium and I apply this to collect such as this strategy or the trades that I post on "Option picks - place some of your option here" topic. I have two Buy-write strategy open.

[BigMike]

Winner,

Excellent post. I am going to check this out. Really appreciated the examples of funds that invest using this strategy.

BigMike