5:03 am, April 20, 2014

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  • TSP-Roth Implementation Stunningly Poor
    Radar Tech
    I was so excited when I hear that TSP was finally going to offer the Roth. What a bitter disappointment to discover that the TSP-Roth investments have to track identically with the other TSP investments. They are totally different when taxes are determined and they have totally different investment strategies. Forcing investments in one to be the same as the other defeats the purpose of having the Roth in the first place. Because Roth earnings are tax exempt, that is where you would invest in your "high flyers" and take more risk, because the earnings are tax free. The standard TSP would then be invested in the G and/or F funds, which provide stable and safe growth (with matching funds) that is tax deferred. The earnings won't be as much, but the matching funds and consistent earnings, as well as the tax deferment (allowing more of your investment dollars to be working for you) would have made that the prudent strategy. Taking risks where earnings are tax exempt and being conservative where earnings are taxed would have been a nice way to balance the TSP retirement investments. As it is now, why bother? (Caveat: 20 years of service with 15 to go before retirement. Roth is fine for the youngsters.)
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  • Roth & Tax Deferred may be the best solution
    Honest Broker
    I started increasing my TSP investment over my career from 5 percent in 1987, 10 percent in 1990s, max in 2000, and catch up in 2006. The Govt contribution of 4 percent was free investment funds, so I at least wanted those funds for the long term. I took some losses during the 2008 recession and the 2011 European meltdown, but ended up with a little over $600K. The ROTH was not available then, but I would have split my investment based on the matching funds and the income tax tables. At $35K there is a 10 percent jump with 3 percent at $85K income. With tax deferred max at $17K and $22.5K over 50, then your ROTH becomes advantageous over $52K and $102K incomes. My retirement check minus deductions puts me in the $52K tax category, so the tax deferred worked out at 3 percent per year plus I made money off the Govt contribution of about 8.5 percent per year. I started a spreadsheet back in 2000 to run through the what if scenarios, which really helped motivate me to save instead of spending.
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  • { "Agree":"1","Funny":"1","Insightful":"1","Disagree":"-1","Offensive":"-1","Troll":"-1" }