YAY! My first deployment 'money fight' with wife - over TSP!

[TSP@ti2de]

Rough night last night. I'm less than 48 hours from coming home on leave for a couple weeks, and made the mistake of bringing up my new financial priorities...

I was weaving through the previous thread, trying to figure out how I too can 'max' at $15K ASAP beginning this October, in addition to front-loading that10% savings plan.

Man, I shouldn'ta said anything... :shock:My wifegot all unglued, saying thatI deviated from my original intent of paying off the house (I will still have plenty of money to do this, I think)

I ran some 'optimistic' 30-year 8, 10, and 12% returns, and that's some HEFTY PAYBACK for not having to do anything else... the power of compounding... WOW!

$139,759.12

$237,946.39

$401,248.96

Now I'm trying to figure out how to convince her that this is righteous... Any takers?

[ou81200]

Hello TSP---

A house is also an excellent investment. In the last ten years. I'm surethat home value has went up faster and higher than a TSP investment. I paid$68,000 for my home in 1994. Itis now worth$119,000. Assuming that the housing bubble does'nt burst, I haveexcellent capital gains in my home. This appears to be the norm across the country.

[Birchtree]

Hi Captain,

Unfortunately you have just encountered one of the lesser know realties of life, and that is it is a proven fact that women make better investors. They are more conservative and less willing to take on risk - as a class of investor. Maybe it's time to delegate some responsibility and let her handle some of that excess change you will have around. She just might surprise you and get some satisfaction at the same time. Encourage her to sock it away in her own deferred comp plan with the new employer. She'll do just fine. Take care.

Dennis

[tsptalk]

TSP@ti2de wrote:
Now I'm trying to figure out how to convince her that this is righteous... Any takers?

Give her Edelman's book (http://www.amazon.com/exec/obidos/tg/detail/-/0060566582/qid=1119663108/sr=8-1/ref=pd_bbs_ur_1/104-5974794-0156720?v=glance&s=books&n=507846). :i

(from prior thread) ... http://www.tsptalk.com/mb/view_topic.php?id=1824&forum_id=1&jump_to=24069#p2 4069

[mutton$]

If you pay off your house, will you not lose a tax shelter?

[ou81200]

Yes---You do lose a tax shelter. But you also loose a mortgage payment:).

You could always buy a second house after the first one is paid off.

BTW, you still have county property tax in some states that are a tax deduction.

[alaskanmoosehunter]

Let me help you out on this from experience....and the experience of others.

If someone takes offense to this well......To bad!

Most women in a marriage don't understand anything other than the money that they have now.Talking about future money is just a pipe dream for us boys and the market is a rip-off, we can't afford it, your throwing money away, you will lose it all then what? Sound familuar?

I work on a Army Base and I hear your problem all the time.....I went through it too. First, you will aways have bills! You will always have someone you owe money too that the nature of the beast. You need to pay yourself and your family first.

This is how you fix it....and it works.

1. Just do it! Start out with the minumim matching % that TSP offers. Otherwise you arejust cheating yourself.

2.Slowly raise your TSP % over a period of time. If you pay off an allotment raise your TSP %.Pay a bill...Raise your TSP %. You get the point.

3. THE MOST IMPORTANT RULE! Don't discuss it. Don't tell her. The money will be worth the future arguement. My wife found out several years later and was pissed....Then I showed her the balance. She has never said a word since and asks me how it's doing now.They will find out it's not a pipe dream.

I've have had a hand full of guys come to me and say thanks.....Because it works!

Chances are you will never convince her......Just do it or you will be a 70 year old man saying, "Welcome to wal-mart do you need a cart?".:*

[Show-me]

Wow............and Amen Brother!:^

[mutton$]

Let's play the devil's advocate: what if the wife was the one to go out there and just do it and not tell her husband until later? What would be his reaction if he thinks she has taken money away from paying the bills, or for something they had already planned for in the future? What if they have high credit card payments hanging over their heads, or a big house mortgage that he's trying to pay off. I can see the guy thinking that the wife is high maintenance on him and not working with him to help reduce their expenses.

[teknobucks]

TSP@ti2de wrote:
Rough night last night. I'm less than 48 hours from coming home on leave for a couple weeks, and made the mistake of bringing up my new financial priorities...

I was weaving through the previous thread, trying to figure out how I too can 'max' at $15K ASAP beginning this October, in addition to front-loading that10% savings plan.

Man, I shouldn'ta said anything... :shock:My wifegot all unglued, saying thatI deviated from my original intent of paying off the house (I will still have plenty of money to do this, I think)

I ran some 'optimistic' 30-year 8, 10, and 12% returns, and that's some HEFTY PAYBACK for not having to do anything else... the power of compounding... WOW!

$139,759.12

$237,946.39

$401,248.96

Now I'm trying to figure out how to convince her that this is righteous... Any takers?

perhaps u could talk her into a "dream house" in order to stay leveraged in re. with these low rates paying off a home loanmeans " i admit i can not earn 5.5% in anything else" to me.

maxing the tsp one would think is a no brainer, but in the end if she ain't happy u ain't happy:shock:

[grandma]

TSP@ti2de wrote:
Rough night last night. I'm less than 48 hours from coming home on leave for a couple weeks, and made the mistake of bringing up my new financial priorities...
... :shock:My wifegot all unglued, saying thatI deviated from my original intent of paying off the house (I will still have plenty of money to do this, I think)
Now I'm trying to figure out how to convince her that this is righteous... Any takers?

#1 -maybe you could start by examing your marriage realtionship. Consciously, or unconsciously, you have told us these are Your New financial priorities.

#2 - Also you might think on whether you have demonstrated your trustworthiness; whether there has been times of deviating from your word, intents before.

#3 - As far as righteousness, what are your guidelines for righteousness? How do you define this word?

#4 - obviously you need to sit down, clear the air, show what you feel is the right directionfor your monies; listen & consider what your partner in life has to say. Pros & cons for Both sides - Then call Larry Burkett's Money Matters/Crown Ministries for their pamphlets/tapes/bks on financial solidarity w/in the family.

http://i4.photobucket.com/albums/y106/triso/angel12.jpg grandma

[grandma]

mutton$ wrote:
Let's play the devil's advocate: what if the wife was the one to go out there and just do it and not tell her husband until later? What would be his reaction if he thinks she has taken money away from paying the bills, or for something they had already planned for in the future? What if they have high credit card payments hanging over their heads, or a big house mortgage that he's trying to pay off. I can see the guy thinking that the wife is high maintenance on him and not working with him to help reduce their expenses.


Devil's advocate is taking the opposite view & developing it from there. Your scenario is that the wife is going out and spendthrifting - leaving them deep in debt, making her a liability to this fellow. A better opposite would be, what if sheis already placing money onto the mortgage principal & onto other debts, & now he is changing his directions w/o presenting his case first. However, paying off the mortgage was no longer a priority for him-, so your comments are irrelevant to what you had intended to communicate - unless you did want to show the wife as a hindrance to him & his goals in life.

This young man has stated he did bring up to her he wanted to change directions - her reaction would naturally be one of fear, afterall how much of the time is she left by herself to do all the Managing, anyway? When he overcomes the natural tendency to say what He is going to do, and presents it as something he wants to discuss as a potential, they should get it okay - provided, of course, there is this mutual trust already in their histories.
http://i4.photobucket.com/albums/y106/triso/angel12.jpggrandma

(And in actuality,the Cpt has no debt except for his house, he is already maxing different places w/his paychecks, he is already funding forthe 2 kids' college days, and she has a good job, too. The collision course ends at the kitchen/dining table w/theirfiles/papers/cards laid out in the open.)

[pyriel]

Hmmm.... The numbers don't lie. The problem here, I think is communication. Talking to someone about a plan is different when you actually show her a plan. Again, I will say it again, the numbers will not lie. I like the way she think which is to remind you not to deviate from the plan. I believe that she is telling you this because she understood that plan and how it will both benefit you. Your job is to convey to her, how this new plan of your is even better than the original plan. How do you do that? Put it in writing. You said that you've been running the number games. Show that to her and explain that it will not only makes sense to deviate from the original plan but it is more beneficial for both of you in the long run.

Some will say that having a mortgage is better for it offset taxes. Others will say that having no mortgage payment is better because you can save and take those interest pmt and invest it somewhere. It really all depends on an individuals. For me, I need to have a mortgage, without it i'd be giving my money to Uncle Sam instead.

You must show her two plans when you get home. One is the original plan that she knows and the other is the plan that you came up with. Bottom line,your new plan must be able to provide significantly more return + security (for her well being sake).Just like what others said, if she's happy, then you will be happy.

As for me, i'm the "MAN of the House" and what I say goes. OK, I have to go now, I still havetwo loads of clothes to wash and give the kids a bath... I did tell her, i'd do itand there is nothing she can do about it...:P

[mutton$]

Yes, Grandma, I was using the devil advocate as a theory - not specifics. Only as a thinking tool. Since we haven't heard anymore comments from the originator, I'm curious as to what his opinion is of what he's read so far. Now let me get specific: The fury of a woman makes Ivan look tame! Been there, done that, and have a holey Tshirt to show for it. What has happened with this gent is deja vu. I pulled the same thing he did (only once)! Sure, I made money, but the silent treatment wasn't worth it. The only way I recovered from that mistake was by squirming my way back in with tickets for a cruise. Communicate, communicate, communicate. I cannot emphasize it enough. You better believe now everything is put down in writing and totally discussed.That's the only way to go in my book.

[Dave M]

Paying off a mortgage isn't always the best thing to do. For one thing it means you have assumed all risk concerning the property. Down here, where my property could be erased in a moment by an Ivan, I like the idea ofsomeone else taking that bite.I have lived in this house for six years, and my mortgage balance has increased by 15% since then: the house is paying for its own upkeep through negative amortization.Yet over time my debt-to-equity ratio has declined steeply, now at 1 to 3 since the property value is about 4X what we paid for it. This is leverage.

That said, I personally would not make any big moves without consulting. One thing you might do, is make your wife the beneficiary of the TSP account. *smile*

Dave

[pyriel]

Dave M wrote:
Paying off a mortgage isn't always the best thing to do. For one thing it means you have assumed all risk concerning the property. Down here, where my property could be erased in a moment by an Ivan, I like the idea ofsomeone else taking that bite.I have lived in this house for six years, and my mortgage balance has increased by 15% since then: the house is paying for its own upkeep through negative amortization.Yet over time my debt-to-equity ratio has declined steeply, now at 1 to 3 since the property value is about 4X what we paid for it. This is leverage.

That said, I personally would not make any big moves without consulting. One thing you might do, is make your wife the beneficiary of the TSP account. *smile*

Dave

Hmmm... Isn't this the reason why there is home insurance? I assume that they will keep this. If a hurricane comes in and their house gets blown away, they are still liable to pay the bank for what they owed. This is the reason why the bank will insist that you have a home insurance when you make a home mortgage.

Now, is it better to pay off their mortgage early? They only owe 63k with 15 year amortized (don't know the interest rate so for the sake of discussion lets say it is 5%). Total interest pmt they will make is under 27k for the life of the mortgage. Keeping this mortgage alive does not help them tax wise since the deduction they get out of it is very small. Paying it off might be a good idea. However, we can also argue since they are not really losing alot by not paying the mortgage right away (27K within 15years is not alot to me but it could be for some people), maxing TSP and 401K and ROTH IRA might be a better deal. His wife just got a job that pays 67K.Socking away 15K of that will save them $3,105.00 in taxes. Right now she is only socking away 10% so she is underfunding her 401k and not maxing out the tax deductible that she could get. Right now, she is only saving $1,462.00.

When he gets back from deployment, he also needs to max out his TSA TSP to 15k. Right now he is putting in 15% of his pay. His monthly mortgage of less than $500.00 will also help to lower down their income(even if it is little).

Now lets say they delay and wait until they pay off the home mortgage. Lets say it will take them 2 years to pay it off. They were able to save $15,258 of the interest pmt for year 5 to year 15. However, we all know that setting aside 15k today vs. 2 years down the line and with the help of compounding interest and reinvesting without being taxed, by the time they retire (60 years old) the savings lost could be as high as $215,000.00. Please see excel worksheet. I assumed that they are 35 years old...

[grandma]

hey, P - when I tried to access the spreadsheet, I got this :(I deleted all of the stuff after the boxes, it took up nearly a whole page -) Is this my computer glitch?

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[pyriel]

Lets try this again....

[grandma]

pyriel wrote:
Lets try this again....Zilch for me - maybe some of the others can get in, tho.

[pyriel]

I tried it again and it is doing the same. I opened it with my computer just to check and it was fine. I put it in a diskette and went to another computer and again it was fine. I think something in the system here is messing it up.

Tom,,,, HELP!!!!

[James]

I am fortunate that I am deployed and single so the only person I have to convince of my financial plan is myself.

I am in agreement with your plan and I am doing the same thing.

First my TSP contributions are maxed out at 10% of my base pay and 100% of my special and incentive pay. This allows me to contribute over twice what I could contribute if I was not deployed.

Then any extra money I had was going towards the SDP (Savings Deposit Program, a savings account for deployed service members that returns 10% interest annually, compounded quarterly.) which I have already maxed out since I have no debts that have an interest rate higher than 10%.

I have no desire to rush paying off my mortgage or my student loans as those rates are low and give me tax breaks. I am currently settling the little dept that I acquired while taking care of some things before deployment and going to max out a Roth IRA. After I do that I will then make accelerated payments on my non-tax deductable interest debts. It also helps that my house is currently being rented out for a substantial amout higher than what my mortgage payment is.

But the way to bring your wife on board is to communicate it to her and show her the numbers. You must remain calm and address all of her concerns. If you don't know the answer to a question of hers you must do your best to find the answer to that question. I'm certain that if you show her the numbers and have a lot of patience she will see that the numbers do not lie.

Just to clarify some misconceptions that I've seen in responses. The max of base pay that military members can contribute is 10%, not 15% like civillian employees. There are no matching funds for military members. I say again, no matching funds for military members. I don't understand why the military doesn't march on Washington to get this fixed. I have already received a response from my representative Bob Goodlatte in which he doesn't address the problem, but just passes the blame. I don't see how this can be viewed as anything other than discrimination against military members. So once I have an opportunity to find the time from fighting this war, he is going to receive a very spirited letter from me.

[pyriel]

sheasljj wrote:
Just to clarify some misconceptions that I've seen in responses. The max of base pay that military members can contribute is 10%, not 15% like civillian employees. There are no matching funds for military members. I say again, no matching funds for military members. I don't understand why the military doesn't march on Washington to get this fixed. I have already received a response from my representative Bob Goodlatte in which he doesn't address the problem, but just passes the blame. I don't see how this can be viewed as anything other than discrimination against military members. So once I have an opportunity to find the time from fighting this war, he is going to receive a very spirited letter from me.

Great advice...

I went over the responses but could not find your finding about posters putting in 15% max is allowed for the military members. Can you please point that out to me. I thought our posters were all correct with what advice they were giving out... Could it be that you've mistaken the 15K TSP max for next year to be 15%, instead?

P

[Birchtree]

All TSP participants can do $15000 next year to include the military folks. This also includes the catch up provisions for the salty dogs that stayed around instead of opting for the 20 year defined benefit plan.

[pyriel]

pyriel wrote:
I tried it again and it is doing the same. I opened it with my computer just to check and it was fine. I put it in a diskette and went to another computer and again it was fine. I think something in the system here is messing it up.

Tom,,,, HELP!!!!
I'll try downloading my excel worksheet one more time...

[James]

pyriel wrote:
sheasljj wrote:
Just to clarify some misconceptions that I've seen in responses. The max of base pay that military members can contribute is 10%, not 15% like civillian employees. There are no matching funds for military members. I say again, no matching funds for military members. I don't understand why the military doesn't march on Washington to get this fixed. I have already received a response from my representative Bob Goodlatte in which he doesn't address the problem, but just passes the blame. I don't see how this can be viewed as anything other than discrimination against military members. So once I have an opportunity to find the time from fighting this war, he is going to receive a very spirited letter from me.

Great advice...

I went over the responses but could not find your finding about posters putting in 15% max is allowed for the military members. Can you please point that out to me. I thought our posters were all correct with what advice they were giving out... Could it be that you've mistaken the 15K TSP max for next year to be 15%, instead?

P




I was under the impression that civillian employees can contribute up to 15% of their pay to the TSP. I could easily be mistaken on this as I know less about the civillian side of the TSP as it doesn't concern me as much as the military side.

I see now that FERS can contribute up to 14% and get matching contributions. And CSRS can contribute up to 9% and get no matching contributions.

[pyriel]

Grandma just gave me an idea on how i can post the worksheet i made for TSP2tide... Now, readers have to go back to my original post.. Too bad, I can't edit or delete within this section...:X














STARTED AT AGE 35
STARTED AT AGE 37

age
yearly investment
8%
total
age
yearly investment
8%
total

35
$15,000.00
1200
$16,200.00
35




36
$15,000.00
$2,496.00
$33,696.00
36




37
$15,000.00
$3,895.68
$52,591.68
37
$15,000.00
1200
$16,200.00

38
$15,000.00
$5,407.33
$72,999.01
38
$15,000.00
$2,496.00
$33,696.00

39
$15,000.00
$7,039.92
$95,038.94
39
$15,000.00
$3,895.68
$52,591.68

40
$15,000.00
$8,803.11
$118,842.05
40
$15,000.00
$5,407.33
$72,999.01

41
$15,000.00
$10,707.36
$144,549.41
41
$15,000.00
$7,039.92
$95,038.94

42
$15,000.00
$12,763.95
$172,313.37
42
$15,000.00
$8,803.11
$118,842.05

43
$15,000.00
$14,985.07
$202,298.44
43
$15,000.00
$10,707.36
$144,549.41

44
$15,000.00
$17,383.87
$234,682.31
44
$15,000.00
$12,763.95
$172,313.37

45
$15,000.00
$19,974.58
$269,656.90
45
$15,000.00
$14,985.07
$202,298.44

46
$15,000.00
$22,772.55
$307,429.45
46
$15,000.00
$17,383.87
$234,682.31

47
$15,000.00
$25,794.36
$348,223.80
47
$15,000.00
$19,974.58
$269,656.90

48
$15,000.00
$29,057.90
$392,281.71
48
$15,000.00
$22,772.55
$307,429.45

49
$15,000.00
$32,582.54
$439,864.25
49
$15,000.00
$25,794.36
$348,223.80

50
$15,000.00
$36,389.14
$491,253.39
50
$15,000.00
$29,057.90
$392,281.71

51
$15,000.00
$40,500.27
$546,753.66
51
$15,000.00
$32,582.54
$439,864.25

52
$15,000.00
$44,940.29
$606,693.95
52
$15,000.00
$36,389.14
$491,253.39

53
$15,000.00
$49,735.52
$671,429.46
53
$15,000.00
$40,500.27
$546,753.66

54
$15,000.00
$54,914.36
$741,343.82
54
$15,000.00
$44,940.29
$606,693.95

55
$15,000.00
$60,507.51
$816,851.33
55
$15,000.00
$49,735.52
$671,429.46

56
$15,000.00
$66,548.11
$898,399.43
56
$15,000.00
$54,914.36
$741,343.82

57
$15,000.00
$73,071.95
$986,471.39
57
$15,000.00
$60,507.51
$816,851.33

58
$15,000.00
$80,117.71
$1,081,589.10
58
$15,000.00
$66,548.11
$898,399.43

59
$15,000.00
$87,727.13
$1,184,316.23
59
$15,000.00
$73,071.95
$986,471.39

60
$15,000.00
$95,945.30
$1,295,261.53
60
$15,000.00
$80,117.71
$1,081,589.10










***DIFFERENCE OF $213,675.00

[pyriel]

Oh no... I totally messed this up. Can someone just please clean up my mess. Please......

[James]

Birchtree wrote:
All TSP participants can do $15000 next year to include the military folks. This also includes the catch up provisions for the salty dogs that stayed around instead of opting for the 20 year defined benefit plan.
Next year I will have to contribute $1250/month of my own money to max out at $15,000.

A FERS employee who makes as much as I do including BAS and BAH only has to contribute $1013.81/month of their own money to max out at $15,000 since they get 5% matching contributions. Which works out to be about $2834.52 in matching contributions over the year.

[pyriel]

sheasljj wrote:
Birchtree wrote:
All TSP participants can do $15000 next year to include the military folks. This also includes the catch up provisions for the salty dogs that stayed around instead of opting for the 20 year defined benefit plan.
Next year I will have to contribute $1250/month of my own money to max out at $15,000.

A FERS employee who makes as much as I do including BAS and BAH only has to contribute $1013.81/month of their own money to max out at $15,000 since they get 5% matching contributions. Which works out to be about $2834.52 in matching contributions over the year.
Hmmmm.... I believe you don't include the 5% matching from your employer since that is not pretax dollar on your end. You still need to do the $1250 to max out. :^

[James]

Pyriel,

So what you are saying that a FERS employee can still contribute $1250/month to max out their contributions for the year at $15,000 and still get 5% matching funds to put them over $15,000 for the year. So in the case of a FERS employee who was compensated at a similar level that I currently am they would have been able tocontribute $17,834.52 with matching contributions over the year where I can only contribute $15,000 since I don't receive matching funds?

[GALLO1]

Sheasijj,

For FERS it is 15% + 5% matching up to 15k. 15K is the max limit regardless of civilian or military.As you pointed out the 5% matching is the difference.

[GALLO1]

Here is additional information straight from the TSP Web site:




What's New




Current Information
http://www.tsp.gov/resources/line.gif

This page was updated on June 8, 2005.


Open season dates: April 15 through June 30. (After this, open seasons are eliminated.)

http://www.tsp.gov/resources/point.gif
IRS [b]FERS (http://www.tsp.gov/features/def_ch1-FERS-CSRS.html) employees for 2005: 15% (up to the IRS limit)

http://www.tsp.gov/resources/point.gif
TSP contribution limit for CSRS (http://www.tsp.gov/features/def_ch1-FERS-CSRS.html) employees for 2005:10% (up to the IRS limit)

http://www.tsp.gov/resources/point.gif
TSP contribution limit for members of the uniformed services for 2005: 10% (up to the IRS limit)

http://www.tsp.gov/resources/point.gif
An updated version of the Fact Sheet, Annual Limit on Elective Deferrals (http://www.tsp.gov/forms/ocfs91-13.pdf), is now available in Forms & Publications on this Web site.

http://www.tsp.gov/resources/point.gif
If you are age 50 or older and you are already contributing the maximum amount of regular TSP contributions for which you are eligible, you may elect to make up to $4,000 in catch-up contributions for 2005. You must make a new election each calendar year. (This limit (http://www.tsp.gov/features/def_contribution-limits.html) changes annually.)
Civilians should use Form TSP-1-C (http://www.tsp.gov/forms/tsp-1-c.pdf), Catch-Up Contribution Election; members of the uniformed services should use Form TSP-U-1-C (http://www.tsp.gov/uniserv/forms/tsp-u-1-c.pdf). For more information, see the Fact Sheet, "Catch-Up Contributions (http://www.tsp.gov/forms/oc03-03.pdf)."

[GALLO1]

One more Straight from TSP For Uniformed Services:



http://www.tsp.gov/resources/top.gif (http://www.tsp.gov/uniserv/features/chapter04.html#top)

Under the law that extended the TSP to the uniformed services, the secretary responsible for each service may designate critical specialties for matching contributions. Members serving in those specialties who agree to serve on active duty for 6 years may be eligible for matching contributions during the 6-year active duty obligation.

The matching contributions apply only to amounts contributed from basic pay and not from any incentive pay or special pay. If you do not contribute basic pay to the TSP, you will not be eligible to receive matching contributions. Matching contributions apply to the first 5 percent of pay that you contribute each pay period. Your contributions are matched dollar-for-dollar on the first 3 percent of pay you contribute each pay period and 50 cents on the dollar for the next 2 percent of pay.

As of the date of this Web edition, matching contributions had not been authorized by any of the uniformed services. Your service will notify you if you are eligible to receive matching contributions.

[Dave M]

That's the story. I contribute 15% of my base salary plus $4000 in over-50 catch-up money plus the govt kicks in 5%. It works out to about 25% of my base pay is going into the TSP this year.

I'm very sorry to hear military is capped at 10% and gets no matching -- why not? That means you should probably be more aggressive with your allocations, whereas I can afford to be pretty conservative and still make my goal.

Dave

[pyriel]

GALLO1 wrote:
Sheasijj,

For FERS it is 15% + 5% matching up to 15k. 15K is the max limit regardless of civilian or military.As you pointed out the 5% matching is the difference.

Hmmm... How do I word this without confusing anyone? TSP is unlimited. The one that set the limit is the IRS. Because your contribution will become tax deferred and will definitely lower down your income (for your W2), they set the limit to 15K. 5% matching from employers is not part of employers base pay. Hence it is not subject to 15K limit that the IRS is limiting. It only makes sense not to include the matching contribution because as of today, FERS employees may contribute 15% with 5% matching. With the matching contribution from the employers, they are now going over the 15% limit set by the TSP.

[James]

Pyriel and Gallo1 are giving conflicting information. Either a FERS employee can exceed the $15,000 limit or they can't.

DaveM, next year the 10% limit goes away and I could contribute up to 100% of my base pay, but am still limited to $15,000/year. Still no matching contributions. While the military can get matching contributions, as you can read above they've never been authorized and if they were it would affect very few people.

[GALLO1]

I'm a little confused now. :shock:My LES says 15% TSP, Gov will match up to 5%.

IRS Limit is 15k.

I thought that I'd read somewhere if I go over the IRS 15k limit then I could lose matching funds.

I guess that's why I usually read and I don't comment. Let me think about this.

[Aggie76]

The way I understand it. I hope this is understandable.

Current year the max FERS employee can contribute to TSP is 15% up to the IRS limit of $15,000. The 5% matching does not count towards either of these limits.

If you make $100,000/year your 15% TSP will hit the $15,000/year IRS limit. No problem.

If you make more than $100,000/year your TSP contributions would stop Nov/Dec timeframe since you hit the IRS limit. At that point your matching funds would also stop since you are not contributing to TSP. If over 50 years of age, catch up also comes into play.

[Dogdaddy]

Aggie76 wrote:
The way I understand it. I hope this is understandable.

Current year the max FERS employee can contribute to TSP is 15% up to the IRS limit of $15,000. The 5% matching does not count towards either of these limits.

If you make $100,000/year your 15% TSP will hit the $15,000/year IRS limit. No problem.

If you make more than $100,000/year your TSP contributions would stop Nov/Dec timeframe since you hit the IRS limit. At that point your matching funds would also stop since you are not contributing to TSP. If over 50 years of age, catch up also comes into play.



Wrong........The IRS limit for 2005 is $14,000 + $4000 Catchup. In 2006 that IRS limit goes up to $15000 + $5000 catch-up with no TSP percentage limits. The way to avoid the year-end problem is to specify a dollar amount ($14,000/26=$539) to contribute per pay period, instead of a percentage........That way you max out the matching contributions, since the limit is not reached until the last pay period of the year.

So for next year allocate $15,000/26=$577 To TSP per pay period + $5000/26=$192 catch-up, if applicable. That way you will get the entire matching funds, which is 5% of your annual salary.

This is all explained in detail on the TSP website.

[GALLO1]

Aggie76, Your explanation is crystal clear, and Dogdaddy, that's correct 14,000 this year.

For anyone that wants to check out more on this topic:

Go to TSP home page, click on What's New, click on Current Information, and then click on, Annual Limit on Elective Deferrals. This is where I read the details on possibly losing matching funds if over the IRS limit.

Sheasljj, you are correct that very few if any uniformed service people get the matching funds.

[James]

GALLO1 wrote:
Sheasljj, you are correct that very few if any uniformed service people get the matching funds.






Actually no one in the military has ever received matching funds.

[Aggie76]

Sorry about the mis-information. I relied on my failing memory as to this years IRS limit. I should of looked up the facts prior to posting.

[GALLO1]

sheasljj wrote:
GALLO1 wrote:
Sheasljj, you are correct that very few if any uniformed service people get the matching funds.






Actually no one in the military has ever received matching funds.


Well, then this statement out of TSP is a little misleading,

"Under the law that extended the TSP to the uniformed services, the secretary responsible for each service may designate critical specialties for matching contributions. Members serving in those specialties who agree to serve on active duty for 6 years may be eligible for matching contributions during the 6-year active duty obligation."

In my opinion, as if it counts, I'd definitely be getting every military person I could to write his or her Congressman and use the chain of command.In the TSP quote above it sounds like the secretaryof each branch has final say as to who gets the matching funds. I'd take it a step further though and would argue that thiswould be an excellent benefit to offerto help retain their experienced service members. I'd think that would be as attractive, if not more than a reenlistment bonus.

I find it difficult to believe that someone hasn't been fanning the flames for this to happen because your highest-ranking officers wouldget the greatest benefit since they make the most money. Collectively, uniformed services need to make some noise and even if there's a serious intent to make this happen you'd probably looking 5-10 years down the road for it to take affect.

I can emphasize with your frustration, probably why I got out after one hitch.

[pyriel]

Dogdaddy wrote:
Wrong........The IRS limit for 2005 is $14,000 + $4000 Catchup. In 2006 that IRS limit goes up to $15000 + $5000 catch-up with no TSP percentage limits. The way to avoid the year-end problem is to specify a dollar amount ($14,000/26=$539) to contribute per pay period, instead of a percentage........That way you max out the matching contributions, since the limit is not reached until the last pay period of the year.

So for next year allocate $15,000/26=$577 To TSP per pay period + $5000/26=$192 catch-up, if applicable. That way you will get the entire matching funds, which is 5% of your annual salary.

This is all explained in detail on the TSP website.

Thanks Dogdaddy... As always, your explanation seems to be clearer than mine. So I am just going to add to what you said. FERS employee please take a look at your last year's LES. If you were maxing out at 14% (for 2004) you'll find out that what went into your TSP is actually more than 14%. If you take a look at your LES now and you know you are maxing out your TSP 15%, you'll find out again that with 5% matching contribution, that your TSP contribution will go beyond 15% due to the matching contribution from your employer.

Hence, it only makes sense that those who are getting matching can sock away more than 15k for TSP on 2006 (15k + 5% matching). This does not pertain to military folks huhuhuhuhuhu..... Please do not just stop reading the TSP guideline. You must also read the IRS guideline on what they will allow us to save into our TSP. As far as the IRS is concern, they don't care aboutthe 5% matching since this will not show up at your W2 at the end of the year...:^