Posted on Apr 7, 2014
Do you invest using TSP, Roth TSP, or outside investments?
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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it didn't seem like the best investment option because investors will need to pay taxes on the earnings when it is withdrawn in the future.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
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I invested all of my disposable income in every possible investment I could since I paid off my student loans in 2003.
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Roth is great I would invest in that I have a Roth in the civilian world I did do the tsp and it was a great way to have a Lil money when I got out
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Hey Gentlmen
Right now I'm investing 5% TSP and 5% Roth TSP, I am 22 years old with no debt and perfect credit. Im not married and make around 23k a year. I also am from Az, where I do not pay any state taxes. With my income so low, and no state taxes, Should I move all 10% invested to Roth TSP?
Right now I'm investing 5% TSP and 5% Roth TSP, I am 22 years old with no debt and perfect credit. Im not married and make around 23k a year. I also am from Az, where I do not pay any state taxes. With my income so low, and no state taxes, Should I move all 10% invested to Roth TSP?
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After reading these comments I think I will start getting into the TSP. Course I will do some research before I do. I have a new SSG that works with me who has been investing 10% of his pay in the TSP for 14 yrs now and currently has almost $300,000. Now Im not saying im not involved in investing. Currently I have a Roth IRA that I've been investing in since 2005. Im not sure what I have in the right now but I do know it has grown substantially over the years. I will definitely start looking at other option now. Thanks everyone.
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SGT (Join to see)
Make sure you research the different TSP plans. G has no interest on it, it is basically a savings account. So what you put in is what you get out. And after you make the allotment go to the TSP website and see what funds you money is going to. This is something I actually need to do because I just made the allotment and that was it. So for all I know the past 4 years my money could have been sitting in G fund which I hope not.
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1, there's no match. 2, there's not near enough education on why TSP is a good thing. When I was in the service, no one botheres to show me how much that $10, $50, $100 a month could add up and make me a millionaire. I wish someone would have given me a lesson on compound interest years ago....this stuff should be taught in boot camp.
http://www.daveramsey.com/article/how-teens-can-become-millionaires/lifeandmoney_kidsandmoney/
http://www.daveramsey.com/article/how-teens-can-become-millionaires/lifeandmoney_kidsandmoney/
Now that I know better, I STILL would not participate in TSP, because again, no match, and 2, I don't want to government responsible for my retirement. I would however, invest in IRAs, 401Ks or mutual funds. I am so grateful that I now work for a company that has a 50% match up to the federal maximum allowed to be contributed. Once day..... when I'm debt free, I will invest the max, so I can get that immediate 50% return on my money.
Whether you have never stepped foot in a bank or you are actively saving and investing for your future, all it takes is a little effort and a lot of patience to become confident in your financial deci...
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LTC Mel Magsino
It never seems to amaze me how some people can be myopic about the government not offering matching funds for military members investing in the TSP. Because of a defined benefit plan (i.e. military pension), military members are not given matching contributions , at least that's the justification I have read. Is this going to change...maybe, or maybe not. But that doesn't take away from the fact that the TSP is a great tax-advantaged retirement investment vehicle for those who qualify to invest in them (mainly due to the super low cost and simplicity).
In any case, I am glad that you are able to contribute to a 401k with very generous match from your employer...normally, the match is something like 50% up to 6% of an employee salary up to the annual limit...and I can only assume yours is the similar.
I caution you to be vigilant about the expense ratios (i.e. costs) for those funds in your 401k...take a look at the PBS Frontline expose' about costs for 401k: http://video.pbs.org/video/ [login to see] /
By the way, Dave Ramsey's advice is good for getting our of debt and saving...but lousy when it comes to investing...COST MATTERS when it comes to investing and his recommended ELPs have to charge investors for their service. One can do better opening up a brokerage account through Vanguard or Fidelity and investing in low cost well diversified index funds.
In any case, I am glad that you are able to contribute to a 401k with very generous match from your employer...normally, the match is something like 50% up to 6% of an employee salary up to the annual limit...and I can only assume yours is the similar.
I caution you to be vigilant about the expense ratios (i.e. costs) for those funds in your 401k...take a look at the PBS Frontline expose' about costs for 401k: http://video.pbs.org/video/ [login to see] /
By the way, Dave Ramsey's advice is good for getting our of debt and saving...but lousy when it comes to investing...COST MATTERS when it comes to investing and his recommended ELPs have to charge investors for their service. One can do better opening up a brokerage account through Vanguard or Fidelity and investing in low cost well diversified index funds.
Will your IRA or 401(k) accounts ensure a safe retirement?
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PO3 (Join to see)
LOL. I guess we'll have to agree to disagree. Dave Ramsey's advise on money is about behavior modification, which in turn, leads to better results overall. I have made more progress following his advise than I did, following the "normal ways of the world." I think I'll stick with his plan.
As far as not matching because of a pension, well, with all due respect, that doesn't mean diddly squat for military members who don't serve 20 years. As such, there are other places to park the investment money that you otherwise would put in the TSP.
Besides, I don't like the idea of depending on the government to be responsible for my retirement. The government is not exactly known for being very dependable, especially with fiscal responsibility.
As far as not matching because of a pension, well, with all due respect, that doesn't mean diddly squat for military members who don't serve 20 years. As such, there are other places to park the investment money that you otherwise would put in the TSP.
Besides, I don't like the idea of depending on the government to be responsible for my retirement. The government is not exactly known for being very dependable, especially with fiscal responsibility.
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SFC (Join to see)
PO3, I totally understand of your lack of faith on the government's competence handling retirement fund, hence social security. TSP is a convenient way for the military personnel and the civil servant to invest on their retirement. And convenience sells. Moreover, TSP is a 401k plan which you can contribute up to $17,500 and you can also put 5,500 to your IRA. If you don't have a 401k plan, you can only stash your retirement at the IRA. However, the IRA contribution limit goes down if your modified adjust gross income is more than $178,000.
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Taking away the fact that of younger service members not being financially responsible, we can alson look at do our service members know all the advantages of using TSP?
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LTC Mel Magsino
I understand the "concern" about no matching for military members...but that alone should not dissuade you or anyone from contributing to the TSP. Your only other tax-advantaged option is a Roth or Traditional IRA which is currently capped at $5,500 annually. That alone is not enough to make you financially secure. Conventional wisdom dictates that one should contribute between 15-20% of your income towards retirement savings/investments...just having a Roth IRA will not get you there. You need something like TSP (which is considered the "best" 401k plan - despite not having matching contributions from the government for military but does for civilian gov't employees - due to its super low costs and simplicity) to get you there, as well as other taxable investments, preferably in low cost well diversified index funds.
I urge you to do some more reading on the benefits of the TSP and not be so dismissive about the TSP because the government offers no matching funds for military members. You are missing out.
I urge you to do some more reading on the benefits of the TSP and not be so dismissive about the TSP because the government offers no matching funds for military members. You are missing out.
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SFC (Join to see)
I concur. Please let me know if there is another way to stash up to $17,500 for their retirement like the TSP while they are in active military.
I can't even do that with my primary residence, not to mention that I have to pay property tax on my primary residence. OUCH! The only tax advantage I get is deducting the mortgage interest and property tax from my gross income on tax return. That's like getting a penny back from spending a dollar.
I can't even do that with my primary residence, not to mention that I have to pay property tax on my primary residence. OUCH! The only tax advantage I get is deducting the mortgage interest and property tax from my gross income on tax return. That's like getting a penny back from spending a dollar.
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Sir, as a former recruiter, I remember encouraging all my future soldiers to take advantage of the TSP as there was a matching incentive of up to 100 per month for the first year which is quite a sum of savings for a new soldier. I think if there was such a program for all soldiers even for just that small window, there would be a lot more takers.
Another detriment to the TSP especially for those soldiers that end up on multiple deployments, is the SDP program which offers soldiers a more tangible way of short term earnings on a savings plan.
I am truly thankful that as a young SPC, my leadership "voluntold" me to attend a couple of finance management classes given by both military sponsored organizations and civilian groups (First Command). The best advice I ever received was to put any pay increase I received into some sort of savings program because if I was living fine on my current pay, then I really wouldnt miss it anyways. While I have progressed in rank and years in service, I still preach those words and encourage all my soldiers to save for tomorrow so that you wont have to worry down the road.
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LTC Mel Magsino
SSG G,
When faced with the option to contribute to the SDP or TSP while deployed, I would choose the SDP and its guaranteed 10% return...if you can take advantage of both, however, then it is a no-brainer.
Kudos to your leadership when you were a young Soldier to "open your eyes" to better opportunities to manage your finances and chart your own financial path. I would caution you, however, that First Command (used to be USPA - I know because I was a client) might not be your best option. First Command pushes loaded funds with high expense ratios...and you can do much better than that. Once I realized that investment costs matter, I increased my understanding and began managing my own investments and pulled money out of my First Command accounts and placed them in low cost and well diversified Vanguard index funds. I would suggest you look into that and read/view the following links:
http://www.bogleheads.org/wiki/Military_finances
http://video.pbs.org/video/ [login to see] /
By the way, I too was in USAREC from 2001-2003 as a Recruiting Company Commander in 3rd Brigade...those were dark days!
When faced with the option to contribute to the SDP or TSP while deployed, I would choose the SDP and its guaranteed 10% return...if you can take advantage of both, however, then it is a no-brainer.
Kudos to your leadership when you were a young Soldier to "open your eyes" to better opportunities to manage your finances and chart your own financial path. I would caution you, however, that First Command (used to be USPA - I know because I was a client) might not be your best option. First Command pushes loaded funds with high expense ratios...and you can do much better than that. Once I realized that investment costs matter, I increased my understanding and began managing my own investments and pulled money out of my First Command accounts and placed them in low cost and well diversified Vanguard index funds. I would suggest you look into that and read/view the following links:
http://www.bogleheads.org/wiki/Military_finances
http://video.pbs.org/video/ [login to see] /
By the way, I too was in USAREC from 2001-2003 as a Recruiting Company Commander in 3rd Brigade...those were dark days!
Will your IRA or 401(k) accounts ensure a safe retirement?
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
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Sir, I get a better return from my professionally managed portfolio. If there was a match, I'd invest up to the limit of the match and that is it. But I also wouldn't change the "pension" for a TSP match.
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LTC Mel Magsino
I don't think anyone in their right mind would advocate using the TSP to replace a COLA adjusted military pension...the TSP is a great way to augment that pension and build that nest egg.
I would surmise that your professionally managed portfolio comes with rather high expenses too...and possibly even using front loaded with high expense ratio funds compared to the TSP. Not to mention that for the military outside of an IRA, the TSP is your main option for tax advantaged retirement investment. Consider your returns as adjusted for expenses and compare that with the TSP returns as expenses matter.
I strongly urge you to check out PBS Frontline's report called "The Retirement Gamble" (google it) and it will open your eyes to the perils of high expense ratios to your retirement savings and investments.
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LTC Mel Magsino
By the way, check out the following links that I've shared with others:
Bogleheads wiki on Military Investing: http://www.bogleheads.org/wiki/Military_finances
The Retirement Gamble expose/article on how high expenses erode your earnings: http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/
Bogleheads wiki on Military Investing: http://www.bogleheads.org/wiki/Military_finances
The Retirement Gamble expose/article on how high expenses erode your earnings: http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/
The Retirement Gamble raises troubling questions about how America’s financial institutions protect our retirement savings.
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
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