Re: TSP vs. Roth
Originally Posted by
ExtremeWX
Thanks Birch!
I do not get matching in TSP since I'm in the Air Force, so would this change your stance on trimming down TSP and maybe go with a max in Roth, and the rest in a standard trading account?
I'm investing about $1K per month now... what would you recommend as the amount to each account?
My original thought was:
Roth: $416.00 per month ($5K per year... max contribution)
TSP: $200.00 per month (benefit of pre taxed $$)
Standard trading account: $384 per month.
As for purchasing individual stocks for my standard account... I wouldn't know where to start. I guess that is where the homework comes in.
Bryan
Bryan,
Your savings vehicle split is good to go assuming you are in the 15% tax bracket or lower. As your taxable income increases the tax advantage value of TSP increases. If you're top bracket is 25% or higher use the TSP more than the Roth. Kinda a rule of thumb - but you will probably have so much moola in your accounts by the time this decision has to be made that you can hire a good financial advisor.
Since the Roth and TSP are retirement accounts you should be looking long term. If you are young you should always hold a large majority of assets in equity funds (C/S/I or equivalent - which all fund houses provide). Even if you rode C/S/I down from late 2007 through early 2009 you would be doing quite well now if you kept on contributing (or increased contributions - thanks BT). Play on the edges - maybe market time 20% - 30% of your assets. Otherwise you will miss 100% of the big booms and your retirement account will not be funding wine and caviar. A better Alpo maybe.
Your standard account must be managed a bit more. Watch out for taxes. Short term gains are taxed high. It is also a pain in the but to track all the tax stuff - and you really can't sluff it off since the IRS gets all the documents. But you can invest here for mid term and short term requirements (a car or a house). That is not possible in retirement accounts.
Finally, why not start your Roth and standard account investing in ETF/Funds that match TSP. Hold off on the individual stock and fancy stuff till you have enough to diversify a bit. And, do you really enjoy poring over the balance sheet of 'Tractor Supply' or something. Yuk, and double yuk...
Lookin' up at the 'G Fund'!!!
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