Semi- New to TSP, New to Forum

[CapeChem]

Hey Im just starting to get serious about investing and learning what I can. I just got in Baghdad to start my tour. I currently invest 5% of my pay into my TSP but also throw in about 10% into a diversified stock account which has surprisingly done above market so far.

I dont make enough to max out my TSP because Im paying off debt aprox. $8k left. (car, student loans, ect) and hoping to look at getting married and buying a house when I get back.

Should I keep doing the 5% into my TSP or should I send that 5% into a Roth since I will be in a higher tax bracket when I get older (Im 23 now, about to graduate with a BS, and hopefully going to law school).

Thanks

PessOP......What in the quote told you that he was active duty military.

[PessOptimist]

PessOP......What in the quote told you that he was active duty military.

Sorry CC, I thought I answered this. It wasn't that quote that gave me the info and I neglected to include the other one.

I googled FERS and dont belive im in it, but I also have never heard of it before. Im in the National Guard, so normally im not a federal employee. I havent heard of them matching any funds.

and

The main difference between the TSP and Roth now that Im in a tax free zone...

Any National Guard troop going to Iraq has been activated and the TSP rules for active military apply. So no matching funds.

As far as putting the tax free income in a Roth, somewhere on this board someone stated it could not be done. I am still looking for it. The truth is out there.

[PessOptimist]

I found the quotes under the thread "Iraq Bound"

Tax exempt money can be contributed to the TSP, earnings willl be taxable when withdrawn. You cant transfer this money to a Roth since its a quazi (mix) of pretax/exempt money, it wont work.

You have to check to see if the Roth will accept tax exempt money. Some plans do, some don't. If they do, it's a great idea but the interest earned from the tax exempt amount will probably still be taxed on withdrawal. The IRS isn't THAT nice!

There is a lot of knowledge on this board. Someone must have the answers to these two questions:

1. Can tax free income be deposited in a Roth IRA and still be tax free when withdrawn? Would that be the original amount or the amount (hopefully) earned?

2. If tax free income is deposited in TSP, when it is withdrawn is the tax free amount originally deposited taxed along with the earnings? (assuming there are any)

My enquiring mind wants to know. Alot of peeps in uniform involved in GWOT need to know.

[Bcf0514]

Hi, I'm Steady and was just about to close down but noticed 'Charmed' and so I popped in.

You should definately keep the 5% going in the TSP - because that instantly DOUBLES with the 5% matching.

Also - being the outstanding 23 year old adult you are - you're asking this question towards the end of a very servere Recession; but THINGS WILL GET BETTER and over the years you will have incredible growth. It's not just the USA - it's pretty much the whole globe - so changes are being made to keep things running better.

Most importantly the TSP is not for the here and now - but for 45 years from now. That is the main problem with this site - and it's not intentional - but too often it's easy to think of the here and now and forget this is a RETIREMENT ACCOUT meant to last over the years.

OK - so I'll stop with the 'father' lectures

THANK YOU for serving your country with a great attitude and for being in Baghdad to start your tour.

THANK YOU for throwing in about 10% into a diversified stock account

MY FRIEND - IT IS VERY RARE THAT A 23 YEAR OLD WOULD HAVE THAT KIND OF WISDOM - THAT'S OUTSTANDING AND DOWN THE LINE YOU WILL SOUND LIKE 'BIRCH' OR 'CAYMAN'

Im paying off debt aprox. $8k left. (car, student loans, ect) and hoping to look at getting married and buying a house when I get back.

I promise you that right here and now there is NO ONE on this entire MB that I respect and admire more than you.

Your priorities are outstanding - you will be debt free because you have the best mindset possible. Trust me if you pick out your spouse with the same magnitude you're doing everything else you'll have a marriage filled with happiness and endless blessings.

THANK YOU - FOR YOUR WONDERFUL EXAMPLE

What a great read to end the day!!

Steady

Thank you a lot Steady, Unfortunately it doesn't look like I get matching funds. I'm starting to get better at taking care of things, trust me I didn't always

Ill look at opening a Roth and contributing to the Roth and the Saving Deposit Program, then pick the TSP back up when I return home. Hopefully I will max the SDP at $10,000 + 10% interest and that will be a nice chuck towards my down payment fund.

[Frixxxx]

Thank you a lot Steady, Unfortunately it doesn't look like I get matching funds. I'm starting to get better at taking care of things, trust me I didn't always

Ill look at opening a Roth and contributing to the Roth and the Saving Deposit Program, then pick the TSP back up when I return home. Hopefully I will max the SDP at $10,000 + 10% interest and that will be a nice chuck towards my down payment fund.

Welcome to the board BCF, I am a reservist and see where you are coming from.

First, verify the tax breaks you currently have. I think if you are in country over six months, all the (base and other) pay is not taxed up to 70K. Investing in TSP for TAX Purposes may not make sense. Investing for retirement does.

So that said, find out the tax break you will be under. If you have a year tour, and just started, then everything from MAY 09 until DEC 09 will be tax free. Everything prior to MAY 09 will be taxable. Since this may be the case, putting in TSP funds will be applied like 401K rules and applied to your taxabale income. You can easily look at your last pay stub and see how much you paid in taxes to see what you are trying to offset.

Make sense?

Hope so.

Keep in touch and be safe!!!!