Military TSP

[Pro-Trader]

No one ever opened a topic in this military category so I thought I'd add one. Although I had the opportunity to add money into a TSP account while I was in the military, I never did. There were two reasons for this decision:

1) There weren't any matching funds. I understand that they had the option to give matching funds; however, from what I understand, they never have and probably never will. I understand Congress granted the option for critical career fields and reenlistment purposes. Understanding that military personnel already have a decent retirement package, matching TSP funds, although costly, would be an excellent and DESERVED incentive to keep personnel in the Armed Forces.

2) Being in the military (Air Force -- 22 years), I was never in a position where I needed ANY tax deductions. Why put funds into a tax-deferred program when I'm not paying taxes on it only to pay taxes on it when I pull it out. If there was a ROTH option, then perhaps I may have considered it. In lieu of TSP funds, I did put what I could afford in Roth IRA accounts for the wife and I.

OK there, we now have a military TSP post. LOL Any thoughts or opinions.

[crashdump]

Is the ROTH IRA option the type that money is taxed before contribution? Then whatever you withdraw down the road is not taxed? If so, thats an awesome deal for the military considering they'd be contributing and withdrawing tax free! How can you beat that!!!

[Dr Pain]

Is the ROTH IRA option the type that money is taxed before contribution? Then whatever you withdraw down the road is not taxed? If so, thats an awesome deal for the military considering they'd be contributing and withdrawing tax free! How can you beat that!!!

I have one of these set up to save for my son’s college and retirement. I know that sounds weird but you can pull the money you put in out at any time without penalty since you already paid taxes on it and it won’t count against me towards financial aid. Hopefully I won’t need it for his college but if I do, I can get it without penalty. You can save $5,000 per year after taxes. I do a direct allocation of $10,000 from my pay, ½ to mine and ½ to a Roth for my wife. I have these set up at Fidelity. At this point I would rather keep it there than deal with the BS TSP restrictions even if they put a Roth element in.

I max my TSP and contribute $10k to mine and my wifes Roth. Basically every pay raise I have had since 2001 has been allocated to savings and investment and my take home pay has stayed the same.

[crondanet5]

I convinced my newly "winged" navigating son about 3 years ago to start a TSP account. It's now reached 5 figures. But the new rule will make it difficult for his account achieve the success we've had in the past. Now that he is in pilot training, I'm hoping he will set up a brokerage account to make some real money. Many wounded Vets are utilizing the TSP as a way to "bank" their money while in recovery. Senior wounded enlistees are trying to advise them where to put their money. Hopefully they will start to log on to this site and see other ways to invest their money in the TSP beside the standard 30/30/35 or 20/20/20/20/20. For many mid-career military, the TSP did not make sense as they couldn't get enough cash into it before retirement to make it worthwhile. But for the yound military member, it is an option to have as a tax-deferred retirment account in their dossier. For this reason alone it is worthwhile. But it is only one part of the equation. If money is tight, and the contributions are automatic, then when the account hits 4 figures, and then 5, the feeling is wonderful. But as the only retirement program for them to have? No. And the pension isn't enough either, and Social Security is a long way away. So it is a player in their retirement package, and should be pursued. I think this could be extremely important if there is a groundswell amongst TSP account holders to change that dumb rule. To have an active account in position, with good cash position, could be a real winner if the rule changes yet again.

[Kenfen]

I'm in the military, and yes, it is a good feeling seeing the account reach a decent amount of money. I did nothing with it until recently, now I strategize every day and watch the market like a hawk. I wish we could move around a bit easier, but maybe that's a good thing for me to have restriction.

The fact that it's tax deferred and non-matching doesn't bother me. It's allowed me to save a nice chunk of change without any effort at all, and I look at it as just another item on the list of retirement wishes.

I have several years left until retirement, so I'm hopeful that with careful planning and strategies, it will grow faster than usual.

Kind Regards, Ken

[john2121]

Greetings! This is a wonderful site for shared knowledge and financial information. I'm active duty military 11 yrs and 1 month, and finally became debt free last month. So, now I have available money to maximize retirement investments and savings. For the next 9 yrs I plan to max the TSP and stash the remaining take home pay in a money market fund w/USAA. My ultimate goal at retirement (20 yrs) is to be able to purchase a home cash 150k-175k. The money contributed to TSP will remain there unless I decide to roll it over to an IRA.

Dr Pain and others,
I would max out both the TSP and Roths as well, but I want my take home pay to be liquid, therefore at this time I don't have a Roth IRA. Maybe I'm being ignorant and not aware of what I could be missing out on as far as future tax benefit, gains, or returns.

Wife and I plan to retire at age 41 and live off military pension, with no debt (CC, car/personal/student loans, etc..) and mortgage payment. The key for my family's road to success is being debt free. It allows freedom of maneuver. That's my current and future scenario. Any thoughts or suggestions.

[crashdump]

Retire at 41? Sign me up!

I would research the concept of good debt vs. debt free. Some may argue that being debt free is not the best way to manage wealth. After talking with a competant CPA or investment advisor, you may find that certain debt, such as a home loan (even if you're able to pay cash), has tax advantages worth considering.

[john2121]

Retire at 41? Sign me up!

I would research the concept of good debt vs. debt free. Some may argue that being debt free is not the best way to manage wealth. After talking with a competant CPA or investment advisor, you may find that certain debt, such as a home loan (even if you're able to pay cash), has tax advantages worth considering.

crashdump,

Yes, as of now my plans are to retire around that age. You can retire early as well if you want. After 20 yrs of military service, I want to maintain my health, relax and spend more time with the family. However, 8-10 yrs from now I may have a different agenda of working post-military retirement.

As far as debt goes, you're right, mortgage debt by most standards are considered good debt with the tax advantages. However, as an emotional relief, I prefer to pay cash for primary home. The elimination of a mortgage, other unnecessary debt (i.e. credit cards, vehicle loans, etc), along with 150k plus sitting in TSP account and military pension can allow you to retire early. That's my take on early retirement. As stated above I may have to get a job if the wife wants me out of the house and not sitting around all day.

[ozrallyats]

The 20 year letter is great and all, the only beef I have with the military retirement system is if you dont reach your 20 years, you get nothing. zip, nadda, zilch. So once you get into the second decade ( I am in my tenth year) you need to go all the way. I wish the military gave us matching contributions as well. I agree ROTH IRAs should be used first, but another strategy to use is invest into the TSP when you are deployed. I put $16,000 in while I was in IRAQ last year, and all that money is tax free, so that is a large tax free chunk when I withdraw it at retirement.

[john2121]

Wow! That's a nice chunk of tax-exempt money you have for later. I plan to do the same. We (CoC) try to encourage others to contribute as much as they can afford, especially while deployed. I even referred them to this website. You're right about the second half of 20 yrs. Because not serving at least 20 will give you nada. Be safe and have a good day!

[john2121]

All,

I think I missed out on some decent gains in the last 7 months (in Iraq) due to all money(new/current) being allocated to G-fund. But that's okay, because a member of TSPTalk brought to my attention of also missing out on substantial losses if I were allocated to C,S,I funds. I've contributed over $16,600 so far (feels good). Now my focus will be to max out RIRAs (USAA money market fund) for wife and myself. As you can see, I'm a green conservative investor, because I don't know any better, yet. But with only 8+ yrs until I take the uniform off, I'm playing catch-up on retirement savings. So, I have to max out all available retirement vehicles. The wife doesn't agree with that strategy, but hopefully she'll understand down the road.

Also, I didn't realize in combat zone, one could contribute up to 49k of TSP money and another 10k IRA tax-exempt money. That's amazing! Any other thoughts/suggestions/advice. Take care.

[TSPking]

All,

I think I missed out on some decent gains in the last 7 months (in Iraq) due to all money(new/current) being allocated to G-fund...

Don't feel bad. I've been active for the past 7 months and have missed out on the decent gains plus managed to lose a little money in the process

[john2121]

TSPKing

Sorry to hear that, but I'm sure your TSP nest egg is nice with the matching contributions you get.

[YoungMind]

I am curious, does that extra alotment also pertain to non military (but Federal) employees as well?

[john2121]

I am curious, does that extra alotment also pertain to non military (but Federal) employees as well?

Are you referring to non military federal employees in a war zone being able to contributing up to 49k. If so, my understanding is only military members can contribute up to that amount. I could be wrong. Not many troops can afford to contribute that much, but if so that's definitely the way to catch up or get ahead on retirement savings. Take care.