Retirement Planning - TSP of Roth IRA? [Archive]

arcticbubba

01-09-2005, 02:43 AM

My plan is to use my promotions and my COLA's as a way to get to 15%. But my question is: should I go for 15% as soon as possible, or back off and do a 50/50 split in my agressiveness between my roth IRA and TSP? 1% to TSP, next 1% to Roth, next 1% to TSP, etc. Just not sure on what approach I should take. My Roth IRA was established when I was 16 and I contributed to that until off and on. So I only have about $1500. I haven't contributed to that since I was 18 and I wonder if I should start now or focus on my TSP. I would like to contribute 15% right now, but like tsptalk mentioned, enjoying life is also a priority.

Also, at what age should I start to back off my aggressive approach I have with the C,S, and I funds. A 5 year, 10 year, 20 year,on contribution allocations would be appreciated. At what age should I start to consider investing in G and F Funds?

Thanks. Bubba

tsptalk

01-09-2005, 05:48 AM

arcticbubba wrote: should I go for 15% as soon as possible, or back off and do a 50/50 split in my agressiveness between my roth IRA and TSP? 1% to TSP, next 1% to Roth, next 1% to TSP, etc.
Retirement planning is not my expertise but I would say your current tax situation may be the answer. If you don't need a tax deduction now you may want to go for the Roth. If you are in a situation where you'd like a tax deductionnow, TSP will give that to you.

pyriel

01-09-2005, 06:02 AM

Hello Arctic,

Whichever one you choose to fund first, you will be ahead of your peers. There are alot of discussions on this issue so just read around. I max on my tsp and max on my Roth IRA. Some likes the idea of maxing ROTH and contribute only 5% to TSP. Just like what Tom had said on his post, it is really up to you to decide that. Read up on this type of discussion and you should be able to get the pros and cons of peoples perception on this issue.

Pyriel

Rolo

01-09-2005, 01:57 PM

Welcome, Bubba!

This is a no-brainer: Max the TSP FIRST, then fund your Roth. Always.

Say your tax rate is 15%. Whatever contributions you make to the TSP will not be taxed until withdrawal far in the future; you do notpay takes now, that is more of your money you keep. Since you will pay less tax, contributing $100 into the TSP would only cost you $85.

Since that $100 investment only costs you $85, it is as if you made $15 off of your investment, or 15%, right? Wrong..a 15% discount is equivalent to a 17.64%increase (100 / 85 = 1.17647).

"What if my tax rate is higher at retirement?"

1. Irrelevant. You will have so much money that it will be inconsequential.

2. You will have other tax advantages available to you; "Investment planning" should also encompass "Tax planning".

3. Wealth equals money times time. $100 compounded over 30 years is far more valuable than some speculative tax savings in 30 years.

Show-me

01-09-2005, 06:06 PM

Well said Rolo. I've never heard it like that before. I have always been torn between just funding 5% in the TSP and the rest in my ROTH and funding the TSP fully. I feel better after your great explanation.

Rolo

01-09-2005, 09:21 PM

Whoo! One thing I forgot to mention; I just remembered it in strategising my finances today:

The difference,and the reason the Roth IRA was created by said Senator, is the comfort that your contributions can be withdrawn at any time for any reason without penalty. This is to get people who avoided the Traditional IRA because they were hung up on forgetting about that money for a long time to invest for retirement.

I call it "Leveln cash reserves", only to be used if I am stuck out in the freezing cold, starving, and the only way I out is to withdraw from my IRA. (Level 1 = Money Market Account, Level 2 = Scottrade,normal brokerage,account, Level 3 = borrow against equity, Level 4 = pimp the girlfriend, ... Level n.)

I have my Roth IRA going and therefore have "Oh! ****!" money. For tax year 2005, I will open a Traditional IRA for the tax benefit; I am trying to get as close to zero taxes as possible, last year was 6.5%.

So, ya, always fund matched stuff first, tax-advantaged stuff next, then capital-gains rate stuff, then normal income tax rate stuff.

Oh...hmm...What if your effectiveincome-tax rate is LESS than the capital gains rate? I'll bet AMT will kick in before that. GUH, I think I will hire a tax accountant/planner this year...too much to remember. (It is good to know as much as possible yourself, though, so you know how to invest/spend/sell/structure.)

Wow...my RSI (Rambling Strength Indicator) is pretty high today. :D

Show-me

01-09-2005, 11:13 PM

Nothing wrong with rambling. It gives people like me the opportunity hear what's on your mind and why you are going in a certain direction. Just like the emergency money point. I read that before but your "rambling" reminded me why it's a good idea to continue funding the ROTH.

pyriel

01-10-2005, 05:14 AM

Well said Rolo...;)

Mike

01-10-2005, 12:02 PM

Here are my two cents...

Here's a hypothetical example of what happens with TSP v Roth investments (assuming the same return / fees / etc):

Tax rate schedule per the IRS website is $4000+25% of any income over $29,050 (assuming you are in the $29,050-$70,350 tax bracket and are single). Given that, here is what happens based on investment:

For every $1000 you invest into TSP, you are cutting your federal tax liability by $250 (and if your state has an income tax, you are cutting that liability as well, though by a lesser amount). Given that, let's compare the TSP and the Roth - assumptions being the fees/expenses are identical as are the returns (you can get them to be pretty close with a low fee index fund from Vanguard or something similar):

$4000 invested into TSP = $1000 tax savings* (current). After 30 years @10% return, this $4000 investment grows to $69,797.61, which is subject to whatever the income tax rate is in 2035 when you take it out. The 2004 tax rate on this amount would be $14,186.90, leaving you with $55,610.71. A Roth investment would simply provide you the $69,797.61, though you would miss out on the $1000 tax savings. Given that, the Roth is the better choice, to the tune of $13,186.90. I don't know about Rolo over there, but I'd certainly notice a difference of that amount in my distribution. :^

Note: this example pertains to what you do with TSP contributions above and beyond the 5% necessary to get matching. I would never recommend a contribution < 5%, which would lose a lot of free money over the years.

As for your specific allocations, that's just a personal choice. Most allocation sites recommend something along the lines of 15% bonds/securities, 40% large caps, 25% small caps, and 20% international for younger investors at / near the beginning of their careers.

Lastly, I recommendthat you hold emergency funds in a money market account. This way, you will basically keep up with inflation *and* retain easy access to the money if it's needed. I use Netbank for this, and their current APY is close to 2% (gotta have at least $500 in there to avoid a $5 fee for minimum balance in a month, though).

Rolo

01-11-2005, 04:42 AM

Mike wrote: $4000 invested into TSP = $1000 tax savings* (current). After 30 years @10% return, this $4000 investment grows to $69,797.61, which is subject to whatever the income tax rate is in 2035 when you take it out....I don't know about Rolo over there, but I'd certainly notice a difference of that amount in my distribution. :^

There are a few flaws with this argument.

1. Are you planning to take your entire TSP/Roth IRA balance in one distribution, and therefore get taxed on it? Taking normal distrubutions and applying tax deductions to it means all of it will not be taxed, effectively lowering your tax rate. Taking distributions from a TSP/Traditional and Roth combo can help in keeping your taxable income low.

2. I am in the 25% tax bracket, but my effective tax rate the last time I paid taxes was 6.55%.

3. You didn't do anything with the $1000 savings from contributing to the TSP. Put that into a Traditional IRA, which would make for another $250 tax savings. For $4000 you contributed $5250. Compound that over 30 years and compare.

4. Compounding one-time investment is not telling the story: IRA's are done every year. A $4000 contribution every year for 30 years at 10% yields $657,976.09. A $5250 contribution yields $863,593.62 andmeets the first scenario's balancein 27-1/2 years.

I recommendthat you hold emergency funds in a money market account. This way, you will basically keep up with inflation *and* retain easy access to the money if it's needed. I use Netbank for this

hehe, me too! I use their checking as well.

Mike

01-11-2005, 05:53 AM

Rolo, I was trying to keep the example artificially simple. If I tried accounting for everything, it would probably just lead to confusion. :P

I'm also accounting for human behavior in the example I gave. How many people take their tax savings/refunds and invest them? Most coworkers I know will just take the money and spend it. Some anticipate the refund and spend before they get it. :shock:

Your points on taxes basically balance each other out. All of our effective tax rates are lower than what I posted, which means you get less of a benefit now off the TSP witholding than in my example - and youtake less of a hitat age 65 when you take distributions. That was another hidden assumption in my argument for simplicity's sake. You'll also note that I was comparing what happens with just one year's contribution over that timeframe. I have no idea how much money he plans on taking out per year in retirement (do any of us know that about ourselves?). An annualized distribution based on what each year's contribution does is a fairly reasonable ballpark guess, isn't it? It'd amount to roughly 1/40th of his retirement account in the first year. That's actually a small distribution. :^

The bottom line is that if you can afford it, invest. Max out the TSP if you can. Max out the Roth if you can. Having each one is important to protect you in different market environments. With TSP, our only protection against a bear is G and F - which are limited in returns to 6% or so in that environment (which is not much!). With a Roth, you could find funds specifically meant to make money in bear markets. I'll start looking for one of these funds for this year's contribution, since I don't have one yet.

pyriel

01-11-2005, 07:08 AM

I took the liberty of putting Rolo's point of view into an excel worksheet. I didn't even put in the agency matching contribution because some of us are in the military and are not getting them.

Pyriel

01-12-2005, 12:17 AM

BEARX, $2000 minimum.Am I correct when after 59 a half, you can withdraw from a Roth, tax-free?

arcticbubba

01-12-2005, 12:48 AM

Allright guys, you got my head spinning now. As for my current tax rate, how do I figure that out? I am 23, single, and don't own a house. So I really don't have any tax deductions at this time. Obviously things are going to change in the future. I am more concerned with my decisions that affect me now. I will revisit my contributions later on when things do change. I know I am ahead than most of my peers and I realize the money I put away now, is only going to benefit my financial future. After reading your posts, I am looking at funding my ROTH IRA instead of my TSP. Obviously, I will keep the 5% going into my TSP to take advantage of the matching contributions. But I like Mikes explanation that funding a ROTH now is more beneficial than funding the TSP. Pay the tax now on the contribution to the ROTH and don't pay the tax on the earnings when you withdraw. Seems like a no brainer, but your explanations got my head spinning. Maybe make it a simple answer on which one I should fund NOW.

TSP or ROTH IRA

If you need anymore information regarding my financial or tax situation, feel free to ask. It will only help you convince me on which one I should fund. Obviously I can't max my TSP or my Roth at this time, but I want to invest more than 5% because I can afford to, just can't afford 15% or $4,000 right now.

Thanks for you replys. Keep them coming.

Bubba

pyriel

01-12-2005, 05:15 AM

Arctic,

Please see the following worksheet before you make a decision.

Breakdown are as follows:

15% TSP without any ROTH contribution but tax savings are reinvested to TSP (Starting 2006 you may put in $15K)

15% TSP w/tax savings reinvested to ROTH. Assumption is that you will not add anything to ROTH IRA contribution.

Minimum TSP w/max ROTH IRA contribution. Assumption is for you to match your agency matching contribution (5%) and max out your TSP.

Max TSP and reinvest tax savings to ROTH without adding any contribution to your ROTH IRA.

MAX TSP and max ROTH. Savings made from TSP is applied to ROTH so you don't have to put the whole entire amount to fund your ROTH.

Don't make any hasty decision. Both point of view base on what you can afford. Most of us here are maxing TSP and ROTH. This is because we can afford them. 2006 is going to be big because max is $15K for everyone. To me, if you are saying you can't afford to max both, then increase your TSP get the tax savings and reinvest them. The tax savings reinvest is money that you made just by contributing. Just my small thought on all this.

Pyriel

Please click right arrow to see all the worksheets.

pyriel

01-12-2005, 05:16 AM

pyriel wrote: Both point of view are valid but you have to base your decision on what you can afford. This is what I meant to say on previous post.

azanon

02-01-2005, 03:54 PM

Welcome, Bubba!

This is a no-brainer: Max the TSP FIRST, then fund your Roth. Always.

First things first, its definitely NOT a no-brainer. It really is a tough decision with several factors to consider. First of all, if you were to search Roth vs Traditional IRA (sub TSP here since they work similarly) on the internet, or Roth IRA vs maxing your 401(K) (tsp) you'll find that 80+% of these articles will conclude that in most cases, they recommend using the Roth over a Traditional and they recommend only contributing to the employer plan to the match point, then switch to Roth, before going back to your employer plan to finish it off.

Second thing i have to disagree with Rolo on, is that in most cases, a Roth IRA will, leave you more money in the end, after taxes are paid on the TSP/Traditional. Sure you'll have to pay the taxes upfront with a Roth, but then you enjoy the benefit of tax-free compounded growth, AND in the end, you actually get to keep every single penny in the account (no tax owed). The only way Traditionals even have a chance of winning in a head-to-head scenario is if your tax rate while working is REALLY high, and you end up in a 15% bracket or less when you retire. Do you feel lucky?

The second potential problem a TSP can cause, is because you'll have to draw on it to liveafter you retire (and pay taxes on that), doing that will end up bumping your tax bracket so highin retirement, that your SS money will get eaten away by taxes as a result. Much better to just have SS, your federal pension, and only a 5% contributed TSP supplimented by Roth than to have a 15% TSP that's going to skyrocket your taxes owed and put you in a high tax bracket to eat up your SS check.

Third benefit of Roth, which Rolo pointed out, is you can take out contributions in a Roth tax free and Penalty free if need be at any time. Granted, i'll do everything in my power to never have to withdraw from a Roth except for retirement, still s*&t sometimes happens. If it does, you want to pay a nasty tax penalty breaking your TSP or borrowing from it or not? I prefer to not have to.

Fourth, TSP currently has 5 funds all run by monkeys (aka index funds), you can make a Roth IRA anything you like, with any investment company you like, including funds run and managed by homo sapiens.

Fifth, if you havent "locked" your money at a 15% rate into TSP,that gives you more flexibility with your paycheck if you need to temporary not contribute to your Roth for a couple months to deal with a financial hardship.

Sixth, its just nice being able to look at a Roth in, say, Quicken and knowing that every single penny you see is yours, and will always be yours. You will never owe Uncle Sam anything from them, ever.

I'm sure there's a few more things, but those are what came to mind.

This is all a minor issue compared to just making sure you're contributing as much as possible to all of your available IRA/TSP options!

Azanon

02-01-2005, 04:08 PM

arcticbubba wrote: I am 23 years old andhave working for thefederal government for almost a year now. I started with 5% payroll deduction and recently bumped it up to 6%. In my TSP I currently have my contribution allocation as 15% in the C fund, 60% in the S fund, and 25% in the I fund.So as I sit here planning for retirement, I am wondering what my next step should be. I have a roth IRA in some mutual funds through Edward Jones. I am wonderingwhat I shoulddo next. Bump up my TSP contribution or start pumping money into myroth IRA?? Thanks foryour rsponse.
If you think tax reform will go through then you would want to work on the TSP. Why? When tax reform goes through you will lose the tax deduction. So if you are in the 25% tax rate...you will lose the 25% "return" of being able to deduct it against your taxable income. Remember the tax reform will be what you buy and not what you earn...which will be extremely regressive for lower income folks...since a larger percentage of their income goes to day to day stuff.

There will be two classes of folks in the U.S. poor and rich. Just look at your property taxes, state staxes, utility increases, etc...who is getting squeezed? The middle class. Your grandma probably did not need to work....now the two adults are working full time and having no kids and still can not make ends meet. Reason I saw that is personal savings is at ALL TIME LOWS...that means a lot of folks are three checks away from the curb.

My grandma retired in 1973 on $103,000. Now 30 years later you could not retire on 15xs that and live the same life style that she enjoyed.

OK whip me now because I speak the truth.

Rolo

02-01-2005, 04:12 PM

Mike wrote: With TSP, our only protection against a bear is G and F - which are limited in returns to 6% or so in that environment (which is not much!). With a Roth, you could find funds specifically meant to make money in bear markets.
D'oh! I forgot about that one! Yes, that makes the case for the Roth if you are investment-savvy enough to benefit. See, I like arguing...I learn stuff. :) Iron sharpening iron.

Truth be told: I will be in this situation next year and am beginning to strategise what I want to do with my TSP/Roth/Traditional contribs.

azanon wrote: Second thing i have to disagree with Rolo on, is that in most cases,

HeeeeeeeeeeeeeeEEEEEEEEEEEEEEEeeeeeeeeeeeeeeeeyyyy yyyyyyyy Az!!!

I wonder where you've been....glad to see you back...you were missed.

azanon

02-01-2005, 04:21 PM

:dude:Haha, i just couldn't let you down Rolo. :u

azanon

02-01-2005, 04:26 PM

If you think tax reform will go through then you would want to work on the TSP. Why? When tax reform goes through you will lose the tax deduction. So if you are in the 25% tax rate...you will lose the 25% "return" of being able to deduct it against your taxable income.

What if taxes go the other way to pay for all this mess we're making in Iraq and other places of the world? Its a gamble regardless of how you play it. If you go for TSP, and the tax rate doubles by the time you retire, guess what pal, you lose bigtime (compared to the individual that dumped his retirement monies in Roths).

02-01-2005, 04:30 PM

The Iraq mess is being funded by our treasury sells to countries like China, Russia and Japan...once they stop buying then things will get real ugly...

do not befooled the U.S. is not paying for anything...it is all going until the old credit card...eventually we will have to start to pay....the budget this year is $430B in the red....that does not count the $80B that will be asked for by the Blanco Casa next week and the 2T that will need to be floated so the brokerage houses can get 1% off social security reform....

Two classes....rich and poor....

Mike

02-01-2005, 04:31 PM

Which is precisely why you hedge your bets and invest in both...

Taxes won't be going up under this president. He only cuts rates and borrows to compensate (bye bye dollar strength). We'll see what he does with the spending levels in his budget proposal - that's the part of the equation to watch closely.

I think long-term, federal spending growth will slow to a crawl and/or tax rates will rise a bit. Our national debt is simply growing too large and needs to be brought under control - otherwise we will be faced with a perpetually weakening dollar, which isn't good for the long-term health of the world economy.

02-01-2005, 04:35 PM

azanon wrote: If you think tax reform will go through then you would want to work on the TSP. Why? When tax reform goes through you will lose the tax deduction. So if you are in the 25% tax rate...you will lose the 25% "return" of being able to deduct it against your taxable income.

What if taxes go the other way to pay for all this mess we're making in Iraq and other places of the world? Its a gamble regardless of how you play it. If you go for TSP, and the tax rate doubles by the time you retire, guess what pal, you lose bigtime (compared to the individual that dumped his retirement monies in Roths).

Guess what Pal? When tax reform goes through...you will lose the deduction on your TSP contributions but on the other side when you take the money out it will not be taxed. So in my mind it makes more sense to fund the TSP.

Because you "earn" the 25% write off now and on the back end you will not be taxed. So if you chuck the money into the ROTH you lose the 25% and the tax free treatment will be lost because incomes will no longer be taxed.

Make sense??

I am not a gloom and dome guy but you have to take what they give you and do the best for yourself with the info ya got.

Good luck out there.

02-01-2005, 04:39 PM

Mike wrote: Which is precisely why you hedge your bets and invest in both...

Taxes won't be going up under this president. He only cuts rates and borrows to compensate (bye bye dollar strength). We'll see what he does with the spending levels in his budget proposal - that's the part of the equation to watch closely.

I think long-term, federal spending growth will slow to a crawl and/or tax rates will rise a bit. Our national debt is simply growing too large and needs to be brought under control - otherwise we will be faced with a perpetually weakening dollar, which isn't good for the long-term health of the world economy.

Mike,

Your tax is increasing...got your property tax statement yet....15 states will be increasing their sales tax this year....it is like being a frog in the hot water....by the way the national sales tax will be on top of state taxes....since the rich will not longer purchase municiple bonds (tax free) that will mean states will have to increase their taxes to make up for that loss. States like Florida, Texas and CA will have to increase their taxes by at least 10% because they float a lot of municiple bonds. I believe CA has 50B in the float right now....the rich will dump those to purchase the higher currently tax income securities because they will not longer be on income...so they will not need to shelter 90% of their wealth.

Mike, sorry if I was rude...but I see what is coming....it is going to be very, very hard for the hard working middle class...

:D You have good posts here I did not mean to anger you.

Mike

02-01-2005, 04:55 PM

Assuming that major tax reform will get through Congress is a reach at best. Most of the population earns less than $100k per year, so anything that is negative for this group is highly unlikely to make it through - because the voters would realize the raw deal they are getting after it is implemented and vote the guys out who voted for it in the first place.

The consensus opinion that I have been hearing on the political shows lately is that *something* will get through and it'll be limited. A flat income tax rate appears more likely than a sales tax due to the regressive nature of the latter system.

Beyond this, the major troublesome issues on the budget and taxation issues are what happens with social security and medicare. Both of those cost a ton of money, and with more people retiring, their funding sources will shrink as the number of beneficiaries grows. This - not Iraq - will be the long-term driver of government tax rates and spending in the future. Based on voting patterns, I'm not at all optimistic. Older people vote in large numbers, and they will do what they have to in order to protect their benefits. This will translate into higher payroll taxes - which none of us can escape, even with retirement witholding. :shock:

As for my tax rates, they aren't doing anything - I'm a renter and my share of property tax is negligable. My rent rate only went up 2%.

azanon

03-02-2005, 03:06 PM

My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).

pyriel

03-07-2005, 10:50 PM

azanon wrote: My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).
Funny how next year is a different story where the max for TSP jumps considerably. The thing is there are many others who will not be able to max out both due to their enthusiasm in satisfying their extrinsic requirements. They live for today without ever thinking about tomorrow. In Texas, I believe, they call that "big hats but no cattle." I learned that lesson two years ago and I vowed to get out of this rat race in 10 years. So far, i'm on course and can't wait to finally look at myself in the mirror, someday,and say "I made it."

03-08-2005, 01:45 AM

pyriel wrote: azanon wrote: My wife and I are finally getting to a point where we can just afford to do both. Solves that problem! (TSP vs Roth).
Funny how next year is a different story where the max for TSP jumps considerably. The thing is there are many others who will not be able to max out both due to their enthusiasm in satisfying their extrinsic requirements. They live for today without ever thinking about tomorrow. In Texas, I believe, they call that "big hats but no cattle." I learned that lesson two years ago and I vowed to get out of this rat race in 10 years. So far, i'm on course and can't wait to finally look at myself in the mirror, someday,and say "I made it."

These days they call it "big truck, no ranch". :^

I'll meet ya for Mai Tai's in the Bahama's in 8 years...........;)

Mike

03-08-2005, 08:41 AM

Heh. I live for tomorrow at the expense of today. Maximum TSP + maximum Roth IRA investment leaves not a whole heck of a lot in the way of "fun money". :shock:

Thankfully, I am able to offset that a little bit by working 24-32 hours of OT per month. :P

azanon

03-08-2005, 01:30 PM

I live for tomorrow at the expense of today. Maximum TSP + maximum Roth IRA investment leaves not a whole heck of a lot in the way of "fun money".

That's my problem. If it was completely up to me, i'd come up with the money np. But, alas, i'm married and getting my wife to see the light isnt so easy. She comes in the door and unloads a wadful of store receipts by the checkbook. I really want to ER, but i also want her to be happy. Trying to do both is very tricky and takes a lot of training (for her) and sacrificing on my part. But instead of working more, like Mike, I just try to make up for it by not getting a heck of a lot for myself.

Gritz

03-08-2005, 03:31 PM

pardon the interruption, but while you are on the subject of roth and ira, would any of you care to provide insight into dividend paying funds that you can invest in with your roth or ira, knowledge of or experience in; i relaize this fits in the Investments Portfolio topics as well, but thought while you folks were in engaged in this line of thinking..., plus i was given some retirement advise to look at these funds and i'm really a novice in funds, so any info is helpful, thanks.

azanon

03-08-2005, 05:22 PM

Maybe just start a new thread with that question. That way people arn't tempted to go onto another subject with little/no relation to the TSP vs Roth issue.

Gritz

03-08-2005, 05:35 PM

thanks azanon, i posted a new topic as suggested.

Rolo

03-09-2005, 01:55 AM

azanon wrote: That's my problem. If it was completely up to me, i'd come up with the money np. But, alas, i'm married and getting my wife to see the light isnt so easy. She comes in the door and unloads a wadful of store receipts by the checkbook. I really want to ER, but i also want her to be happy. Trying to do both is very tricky and takes a lot of training (for her) and sacrificing on my part.
Hey Az, my g/f says, "Take...the checkbook...away...and the credit cards." heh. Yes, I say make a financial schedule and put her (and you) on an allowance.

I was just thinking what my g/f just said, "If she's shopping that much, then she may not be happy anyway." I have to agree that maybethe focus should move to more intrinsic happiness.

And if talking doesn't work, break out the paddle! :shock:

As for me, I invest heavily during up-markets and do a little shopping during lulls/down markets, but always fully fund my retirement accounts.

azanon

03-09-2005, 07:19 PM

Well, Rolo, speaking generally its not that she spends too much. If you compared her to the average american, she's probably more on the frugile side. But us "ultra savers" are anything but status quo. So i do fully realize i'm asking her to be far more frugile than your average Joe.

I didnt manage to max my retirement accounts last year, but you have to remember, for me (us) that's a lot of money. Look at this year. 15% of what i make (TSP) is 10K dollars. Two, fully funded IRAs is another 8K. So that'd be 18K dollars just for retirement accounts alone you're suggesting i "always" fund. On top of that, my wife's new job might also have a matching 401(k), so my total retirement fund options could be pushing well past 20k/year. Ok sure, i'm going to actually try to pull that off, but that's hardly normal if i manage it.

That's to say nothing of various other "savings" we all need (emergency funds, larger upcoming purchases (such as a car), home repair, home improvement, college funds, on and on)

jgpalmerdds

03-09-2005, 07:41 PM

Rolo,

So you max out your TSP and your Roth IRA each year? I used to be able to do this while in the private sector, but not now.

Joel

zbwmy

03-09-2005, 09:14 PM

At your age it's tough to do both. If you have 6% in now put another 1% in each Jan. when we get our raises. See if you can also match that in the Roth until you max out the annual contribution. Remember when you retire the money in your Roth is ALL yours.

pyriel

03-09-2005, 09:44 PM

Rolo wrote: azanon wrote: That's my problem. If it was completely up to me, i'd come up with the money np. But, alas, i'm married and getting my wife to see the light isnt so easy. She comes in the door and unloads a wadful of store receipts by the checkbook. I really want to ER, but i also want her to be happy. Trying to do both is very tricky and takes a lot of training (for her) and sacrificing on my part.
Hey Az, my g/f says, "Take...the checkbook...away...and the credit cards." heh. Yes, I say make a financial schedule and put her (and you) on an allowance.

It takes time for them to see the light sometimes but once they see it, theybecome more frugal than us. One thing that i did to break her is to put her in charge of the check book (i am always checking it too). If we write a check or use our credit card, she automatically takes it out of our checkbook right away. The premise is to pay the whole entire balance every month since money was already set aside. Also when she saw that the checkbook is getting close to negative, she knew that she couldn't spend anymore (except emergency).

Another thing that we did is to take out cash at the beginning of the month and used it for our allowance. We sat down and calculated that $20 per workday and $25 per weekendday spending money for each other was more than what we really need. We are ending up having more cash in our pocket since we really don't spend $20 for lunch at work (and weekend). Other things like gas, maintenance, groceries are not included with that. I am actually getting the best out of this because I go home for lunch since I am only 10minutes away from work and still get my aily allowance. We took credit cards that gives us airline mileage so at the end of bthe year, it is not uncommon for us to receive 20-40K miles which we used for travel. BTW, we started with $5 each yearsago and we were bringing our own lunch. Next year will be a challenge (but manageable)and we are prepared for that since it will be 15K each max forour TSP + maxing the ROTH IRA. Overall, all of us here in this board is in better shape than most of ourcounterparts. I am just glad to have known you all....

Rolo

03-10-2005, 12:17 AM

jgpalmerdds wrote: So you max out your TSP and your Roth IRA each year?

Yes. g/f maxes out 401(k) and Roth as well (I manage her money too). I just can't not do it. Adding to my regular Scottrade account is going to be difficult, though, with a new house to furnish, but I can postpone funding that for a while.

Let me add a little context: I am in the "I wish I started sooner" club; I have ten years to compensate for.

jgpalmerdds

03-10-2005, 12:39 AM

Rolo,

Beware of Scottrade now!! They have new fees for trading. For instance, you heard me talk about Profunds before, right? Now when you sell any of the Profunds, you get charged $17 a fund, in each account, regardless how long you keep it. This was new as of 1/3/05. Just thought you should know. For instance, if you have 5 different Profunds mutual funds and you want to go from long to short, you have to pay 5 X $17 and that can add up. I just got burned on that to the tune of $527! I bought the funds in Novemeber (before the rule even existed or was let known)and sold about 2 weeks ago and never knew about the new rule until I got hit with all the fees. Ouch!

Joel

Rolo

03-10-2005, 12:47 AM

Yeah, ouch! Is that with any mutual fund or just ProFunds? My Scottrade is totally dormant right now, so I will check all the rules when I get back into it....yeah, I would have assumed same ole same ole.

jgpalmerdds

03-10-2005, 12:56 AM

Rolo,

Check the fine print. My account is dormant as well as I went with a CFP for my individual IRA's (long story) now. They have "no transaction fee" funds, but they need to be on the list of "no transaction fee" funds. Scottrade has that list. As far as I'm concerned, they have brought themselves down to everyone else's level as far as fees goes. It is really a shame.

By the way, how did you get a 6K picture to upload? Did you just take a real low res. picture of yourself? The smallest size I could get from my existing picture was 75K? What's up with that?

Joel

tsptalk

03-10-2005, 02:26 AM

jgpalmerdds wrote: By the way, how did you get a 6K picture to upload? Did you just take a real low res. picture of yourself? The smallest size I could get from my existing picture was 75K? What's up with that?
Joel -
If you don't have photo editing software, you can email me the pic if you'd like and I'll shrink it down and send it back.

Rolo

03-10-2005, 02:37 AM

Ditto...I'll hook anyone up with their pic...PM me for my e-mail address.

At least ST has a list...USAA doesn't....I put in a trade and cancel it if it has fees, only way to tell.

jgpalmerdds

03-10-2005, 04:38 PM

Thanks, guys. Tom, I will e-mail it to you for editing. You should of seen me trying to take these pictures of myself last night, I think I broke the camera! How come the camera makes you look fat? (oops that's right, it is the extra 40 pounds fromcollege that does that) Out.

Joel

cowboy

03-10-2005, 08:17 PM

I won't put my picture on the internet. If I did. Rolo would probably need a new girl friend as she would probably move up here. LOL!!:D

Rolo

03-10-2005, 11:42 PM

ehehehehehe

Well, that's why we have leashes. :D

GGal

03-11-2005, 02:40 AM

:?Hi, I asked the crew at lunch today, "can I contribute the max to my TSP, and also contribute to a Roth IRA?"

The answer: a resounding "no" from everyone at the table! But, according to this forum, this just ain't so! Help please, on the law?

Reason important: I'm 51, and just got started seriously on my TSP a couple of years ago (don't ask).....the balance prior to that came mainly from the gov'ts 1%......so here I sit with only $80,000 in the TSP, and only 8.5 yrs to retirement. I am now of course doing the maximum 15% as well as maximum catchup.

I'm also shaking in my Peachy boots - wanting to be as aggressive as possible to make up for lost time. Currently 20% G, 25% C and S, and 30% I - but this market has me scared.

I'm betting that taxes will indeed go up due to the deficit issue as well as social security problems. So a Roth would be good, if it is allowable.

I read the Pub, but just couldn't quite figure it out.

Thanks

Jan

VictorPR

03-11-2005, 02:57 AM

Jan......the answer is YES, I have both (Roth IRA and TSP) and I faithfully contribute the maximum on both every year. Stick to this website and you'll be able to learn tremendously as about every situation possible comes to the table soon or later. Good luck. Victor:^

GGal

03-11-2005, 03:35 AM

:) Thanks Victor, this is great news, considering my situation!

Now, any advice from you or others as to where to go to get the Roth, and what kind of funds, given my age?

Thanks again, my peaches are grinning!:cool:

Jan

cowboy

03-11-2005, 01:48 PM

HAHAAHAHAHA! LOL! You probably have the old pooper scooper close by also. :D

GGal

03-12-2005, 04:32 AM

Well, actually, upon further research I found that I cannot contribute to a Roth, because of AGI limitations.

I am married and living with my spouse, but for reasons better not discussed here we file married filing separate.

Since my AGI exceeds $10,000 (the limit for MFS in making this determination) - I alas cannot do it (the Roth.)

If we filed Joint, the limitation would be $160,000 - -I'm sure that would cut it close for many married couples.

I'm expecting an insurance settlement soon - maybe I'll get into a growth fund, or something.

Anything to help make me feel I'm not fighting a losing battle!

Gawga Peaches Are Sweeter!

GeorgiaGal