Posted on Apr 7, 2014
Do you invest using TSP, Roth TSP, or outside investments?
23.8K
98
80
5
5
0
Throughout my military career, I have had many leaders recommend investing in the TSP. I never wanted to because it didn't seem like the best investment option because investors will need to pay taxes on the earnings when it is withdrawn in the future. Since October 01, 2012 the Army has had a Roth TSP in place. To me, this seems like a much better investment option for a majority of Soldiers because contributions are already taxed at the investor's current tax rate, but will be tax free upon withdrawal in the future. Since many Soldiers pay such a low tax rate (factoring in the already low tax rate due to income level, the earned income tax credit, any child tax credits, and any education tax credits), that this can be a virtually tax free way to invest.
Do you invest, and if so, do you use either of these options or do you use another method to invest? I use the Roth TSP and have realized about a 6% gain since starting in Oct 12.
TSP
Retirement
Investing
Personal Finance
Posted 12 y ago
Responses: 30
1
1
0
I'd recommend investing in a Roth IRA over the TSP for the following reasons:
1. You'll be able to withdraw your earnings tax-free when your 59 1/2
2. So many great funds to choose from. I recommend a solid large cap growth fund. With the TSP you are severely limited on what funds to invest in and the fact that uncle sam doesn't match your contibutions to a TSP.
3. Personally, I want control over my money instead of the federal government.
I'm not a certified financial planner but just my $0.02. Good luck
1. You'll be able to withdraw your earnings tax-free when your 59 1/2
2. So many great funds to choose from. I recommend a solid large cap growth fund. With the TSP you are severely limited on what funds to invest in and the fact that uncle sam doesn't match your contibutions to a TSP.
3. Personally, I want control over my money instead of the federal government.
I'm not a certified financial planner but just my $0.02. Good luck
(1)
(0)
1
1
0
First off good job on participating in your future wealth. I have been invested in the TSP program since it was available to us in the Military. I have seen some very good growth years (2008 was not so good). You are also correct on the pre taxed option it is very smart to do that as well. I had private Roth before it was available through the TSP. By doing what you are doing you are setting yourself up for success in retirement. I wish more troops would look to the future.
(1)
(0)
1
1
0
I've been doing the TSP hard and heavy since 2001. My thought was/is that while maybe not the best it at least gets the ball rolling. The one thing that I do like about the TSP vs the Roth TSP is the tax deferment part. While yes I'll probably be in a higher tax bracket when I draw the money out of the TSP it does lower my current taxable income. There has been a few years where my TSP has deferred enough of my taxable income so that I fell into a lower tax bracket. So in that sense it's been a win for me.
Right now I have the traditional TSP,a Roth IRA and a traditional IRA. The traditional IRA is pre military. I didn't do the Roth TSP because by the time it appeared I had my Roth IRA already setup and didn't see a difference between the two.
Right now I have the traditional TSP,a Roth IRA and a traditional IRA. The traditional IRA is pre military. I didn't do the Roth TSP because by the time it appeared I had my Roth IRA already setup and didn't see a difference between the two.
(1)
(0)
1SG (Join to see)
Douglas, two things to think about..
1. When you turn 70.5, you will have to take RMD's from your Traditional's. Between, Social Security for you and your wife (just assuming) and your pension, you will probably remain in the same tax bracket. Now, money is required to come out and will be taxed.
2. No one knows where tax rates will be in 30-40 years. Most do not think they will be going down. Maybe the same at best case.
1. When you turn 70.5, you will have to take RMD's from your Traditional's. Between, Social Security for you and your wife (just assuming) and your pension, you will probably remain in the same tax bracket. Now, money is required to come out and will be taxed.
2. No one knows where tax rates will be in 30-40 years. Most do not think they will be going down. Maybe the same at best case.
(0)
(0)
1
1
0
Sir, I do agree with a majority of the comments posted. I
have had my TSP for about four years now and honestly I try not to dwell on how
much I make. I personally have preached about the TSP program to anybody that will
listen and it always ends the same, I will start it next month. I teach the set
it and forget method for the SM that have sticky fingers when it comes to their
savings account. It would be a great idea to match contributions but due to my
lack of enthusiasm about finances the TSP was just the best way to go.
(1)
(0)
LTC Mel Magsino
I commend you for at least recognizing that the TSP was a great deal and for making saving/investing a habit. The set-it-and-forget-it approach is best as you wouldn't even miss that money that is compounding with time. In addition to preaching about the benefits of TSP, maybe you can show them how easy it is to open and share how much your money has grown for the last 4 years...maybe that would be enough to motivate someone (even just one Soldier) to act.
(0)
(0)
1
1
0
Another possible reason is because USAA advocates against TSP and promotes their own vehicles.
(1)
(0)
1
1
0
Very few hear about it. I was nearly out of the Marine Corps before I heard a Gunny talking about it. I think if more knew about it the participation rate would be much higher. It may go hand in hand with teaching younger members of the military about personal finance, which may reduce/prevent many headaches and hardships that come from uninformed people who have very little if any experience with investing, saving, or even organizing a personal budget.
(1)
(0)
LTC Mel Magsino
CPL Fernandez,
I would have to agree with you that Financial Education/Financial Management is an afterthought in our education system. Many young kids are blissfully unaware of the value of time to their financial future and the power of compounding. There are ongoing efforts in the military to impart some financial education/training to young Soldiers, but often times, it is in response to a Soldier and his/her family being embroiled in some financial hardship...more reactive than proactive.
I would have to agree with you that Financial Education/Financial Management is an afterthought in our education system. Many young kids are blissfully unaware of the value of time to their financial future and the power of compounding. There are ongoing efforts in the military to impart some financial education/training to young Soldiers, but often times, it is in response to a Soldier and his/her family being embroiled in some financial hardship...more reactive than proactive.
(0)
(0)
SSG Robert Burns
If I am not mistaken it is mentioned in the remarks section of every LES you get. You just simply have to read your LES to hear about it.
(1)
(0)
1
1
0
I don't know. I made 29% last year, but I am very active in my TSP making moves weekly.
(1)
(0)
LTC Mel Magsino
Is 20% over 5 years an average annual return or Compound Annual Growth Rate? Note that the TSP S Fund had an average annual return of 22.08% over the last 5 years...and that's just keeping you money in the S Fund (lazy investing as you call it) without the market timing.
(0)
(0)
SSG Robert Burns
Im not sure where you get those numbers from but here's some from the TSP website which is not even close to what you just said. https://www.tsp.gov/investmentfunds/fundsheets/fundPerformance_S_Perf.shtml
(0)
(0)
LTC Mel Magsino
The figures in the link you provided count 2008 (which was a bad year)...the numbers I provided included YTD 2013 and can be extrapolated from the same figures in your link.
(0)
(0)
SSG Robert Burns
Yes, so I said the last 5 years which would be Oct 2013 - 5 years which would include 2008 unless my math was off. October 2008 was (20.99%), November (11.13%), and December 4.68%. That happens to be the worst quarter of 08. So you're saying that comes out to 20%?
Also who do you know that has had 100% contribution and distribution in the S fund for the last 5 years?
(0)
(0)
1
1
0
Well Sir, it's probably from lack of knowledge. I know I didn't contribute to my own TSP until I was looking at my Soldier's LES and saw that some of them had a TSP, and this was about over a year of being on active duty. I still don't exactly know what a TSP is and how it works.
(1)
(0)
LTC Mel Magsino
1LT Gilcrest,<br>I suspected as much...which leads me to believe that we are doing a poor job of educating our Soldiers about the benefits of contributing to the TSP. Much like the Career Status Bonus (CSB) Redux a decade or so ago, I don't think we did a good job educating Soldiers on the downside to that deal either (http://the-military-guide.com/2012/08/16/over-a-decade-later-redux-still-sucks/). I tried unsuccessfully to dissuade at least two of my NCOs from taking the redux when I was a company commander....despite providing compelling figures to back up my argument.<br><br>I suggest you take some time to read this link which provides the basics for military finances - include investing (http://www.bogleheads.org/wiki/Military_finances). In essence, the TSP is the government's 401k plan (with no matching contributions from the government) for military members. It has the lowest costs and many investors point to its simplicity and low cost as a model for all 401k plans (http://www.cbsnews.com/8301-505123_ [login to see] 6/thrift-savings-plan---the-model-for-all-401k-plans/)<br><br>I commend you for at least opening a TSP account...you just have to take it up a notch and educate yourself and be on your road towards financial independence,<br><div class="pta-link-card"><div class="pta-link-card-content"><div class="pta-link-card-title"><a target="_blank" href="http://www.cbsnews.com/8301-505123_ [login to see] 6/thrift-savings-plan---the-model-for-all-401k-plans/">Thrift Savings Plan - The Model for all 401(k) Plans!</a></div><div class="pta-link-card-description">401(k) retirement plans are often big ripoffs. Who has the best 401(k) plan in the country? The US Government's Thrift Savings Plan (TSP) is the 401(k) plan I wish we all had access to.</div></div><div style="clear:both"></div><div class="pta-box-hide"><i class="icon-remove"></i></div></div><div class="pta-link-card"><div class="pta-link-card-picture"><img src="http://www.bogleheads.org/w/images/thumb/0/0a/RSS_Feed_icon_-_200px.png/20px-RSS_Feed_icon_-_200px.png"></div><div class="pta-link-card-content"><div class="pta-link-card-title"><a target="_blank" href="http://www.bogleheads.org/wiki/Military_finances">Military finances - Bogleheads</a></div><div class="pta-link-card-description">To assist in the education of U.S. military personnel on financial topics, this article departs from the wiki's policy of neutrality. Please see forum discussion: Military Investing
</div></div><div style="clear:both"></div><div class="pta-box-hide"><i class="icon-remove"></i></div></div><div class="pta-link-card"><div class="pta-link-card-picture"><img src="http://the-military-guide.com/wp-content/uploads/2012/08/graph-of-high-three-pension-vs-redux-csb.png"></div><div class="pta-link-card-content"><div class="pta-link-card-title"><a target="_blank" href="http://the-military-guide.com/2012/08/16/over-a-decade-later-redux-still-sucks/">Over a decade later, REDUX still sucks</a></div><div class="pta-link-card-description"> A reader e-mailed a new question on an old debate: I have a younger relative about to reach 15 years in the Army. Currently he is an E-7 and was presented with the pension choice of t...</div></div><div style="clear:both"></div><div class="pta-box-hide"><i class="icon-remove"></i></div></div>
</div></div><div style="clear:both"></div><div class="pta-box-hide"><i class="icon-remove"></i></div></div><div class="pta-link-card"><div class="pta-link-card-picture"><img src="http://the-military-guide.com/wp-content/uploads/2012/08/graph-of-high-three-pension-vs-redux-csb.png"></div><div class="pta-link-card-content"><div class="pta-link-card-title"><a target="_blank" href="http://the-military-guide.com/2012/08/16/over-a-decade-later-redux-still-sucks/">Over a decade later, REDUX still sucks</a></div><div class="pta-link-card-description"> A reader e-mailed a new question on an old debate: I have a younger relative about to reach 15 years in the Army. Currently he is an E-7 and was presented with the pension choice of t...</div></div><div style="clear:both"></div><div class="pta-box-hide"><i class="icon-remove"></i></div></div>
(3)
(0)
Cpl Ray Fernandez
LTC Mel M. Sir I don't think the problem is solely the realm of the Army in educating young soldiers about planning for their futures. It starts much earlier than that, most people adopt the habits of their family members when it comes to personal finance. Most Americans don't have much of a plan for their own retirements and the education system doesn't focus on personal finance either. The closest I had to a personal finance class was my senior year economics class, and that didn't cover the necessities of budgeting, saving, or investing.
(1)
(0)
CPT (Join to see)
Thanks for the links. I am definately going to be digging into my TSP more. I'm good with money management, but investing/saving for retirement is a whole different beast.
(1)
(0)
0
0
0
I work in this field. The TSP has good points and bad points just like everything else. That being said anything that gets Soldiers to invest is a good thing. Investing somewhere and putting money towards your future is much more important than what you invest it in. If you want to learn about this topic find a professional and become knowledgeable.
(0)
(0)
I contribute 44% of all my pay into Roth TSP - C fund and S fund - 50/50 (riskier funds).
(0)
(0)
Read This Next
Continue with Facebook 
Continue with Google