Thread: Is this a valid strategy?

Welcome, Lacy!

What you can do, to get your feet wet, is only "play" with a portion of your TSP account; partition it into two "accounts": one buy-and-hold with your current allocation, the other for trend-trading. Then see which one performs better.

Or, if yer like me, impatient, all-or-none kinda person, just screw it and move it all around. Don't eat Tums like candy, though (it causes constipation, heh). :shock:



Question: If you were to fund your TSP the full 15%, how much $ do you save on taxes buy funding that 9% over what you are funding now? You could then take those tax savings and fund the Roth. example:

9% * $45K = $4K, which is max for IRAs

say 25% tax rate (+state taxes?) * $4K = $1K savings on taxes that can be put into Roth. That's an extra 2.22% gross salary invested.

15% * 45K = 6750

6750 + 1K = 7750 / 45K = 17.22% invested while still paying 15%.

:dah:Hi Rolo. Thanks for the response! Now, this is probably a great big "duh!!!" but, if I understand you correctly, you are agreeing that my TSP/ROTH strategy is a good one......yes? ...or do I have it backwards? I'm hearing you say that, with the tax savings, I'll be actually saving/contributing approx. 2.2% more than I would be doing with all my eggs going to the TSP basket. Am I getting it? I'd like to be able to max out a ROTH and contribute the max to the TSP also, but as of yet, 15% is all I have to spare from my budget.

What my Cryptic Writings are saying is this:

- TSP contributions are not subject to income tax (I estimated 25% tax rate for you)

- .'. on whatever you contribute to TSP, you will save 25% in taxes

- If you contribute 15% to TSP rather than 6%, you will save ~$1K/year since you are not paying income tax on that $4K (9% diff)

- That extra $1K can be put to a Roth. Total invested: 15% TSP, 2.2% Roth. When your income increases/spending decreases, you can add more to Roth.

Does that make sense?

:'

GeezZZzzz....No, Rolo, that is very clearnow.Thanks for clearing that up. I had been under the impression that all my TSP contributions "were" taxed, upfront as part of my gross income,and then again at withdrawal, so there was my confusion.

Thanks again.

Nope, they actually lower your declared income automatically. This is where tax planning and investing occur concurrently. (say that five times in a row, heh)

:^

My gosh, I don't know how I missed that. I guess I once knew and just forgot it or something....at least I hope I did. I'm a dim-bulb about all this but I've done okay I guess to know so little. Just hooking up with you this a.m. has helped me tremendously. I am going to continue with my entire 15% to the TSP and will work on the ROTH a little along and along. I'm kinda excited about watching and following this site and trying to maximize my returns with some fund-shuffling now and then.

Again, thanks a bunch for switching on the light for me....I'll be watching for your posts.

Have a great weekend!!