Simple IRA & TSP

[uknowwho]

As a small business owner are you authorized to have both a Simple IRA and the TSP retirement accounts?

[Birchtree]

If you mean Savings Incentive Match Plan for Employees the answer is yes. Since you are already in a deferred compensation plan (401(K) type) such as TSP, a solo retirement plan 401(K) won't help because an individuals's deferrals in both plans together can't exceed the $15,000 cap for 2007, $20,000 if you are over fifty. Of course you are limited in your Simple IRA plan as far as contributions. The SEP, Simplified Employee Pension plan, might be worth an investigation - you can contribute more as the salary rises.

[uknowwho]

If you mean Savings Incentive Match Plan for Employees the answer is yes. Since you are already in a deferred compensation plan (401(K) type) such as TSP, a solo retirement plan 401(K) won't help because an individuals's deferrals in both plans together can't exceed the $15,000 cap for 2007, $20,000 if you are over fifty. Of course you are limited in your Simple IRA plan as far as contributions. The SEP, Simplified Employee Pension plan, might be worth an investigation - you can contribute more as the salary rises.

Vanguard recommended the Simple IRA on their website based off my business circumstances. I already have a Roth IRA through them (VTIVX), but was considering the Simple IRA because it has a $10,000 contribution limit compared to the Roth's $4,000 limit. With the TSP and the Simple IRA I'll be able to contribute a total of $25,000 a year and deduct the matching contributions I make.

[Birchtree]

Sorry, but you may not be able to deduct your contributions into your IRA because you are already covered by a retirement plan that being your future annuity. All the subsequent gains in the IRAs will be tax deferred. Think about buying individual stocks for both of the IRAs - they give you so much more flexibility with dividend reinvestments 4 times/year.

[uknowwho]

Sorry, but you may not be able to deduct your contributions into your IRA because you are already covered by a retirement plan that being your future annuity. All the subsequent gains in the IRAs will be tax deferred. Think about buying individual stocks for both of the IRAs - they give you so much more flexibility with dividend reinvestments 4 times/year.


My future annuity? According to the vaguard website if you are the employer and an employee you are authorized to deduct the matching contributions.

[Birchtree]

Yes, but you are currently covered by another defined benefit retirement plan. When you leave government service your situation will change.

[uknowwho]

Yes, but you are currently covered by another defined benefit retirement plan. When you leave government service your situation will change.

So, when I retire and can no longer add new money to the TSP would you recommend I roll over the TSP into my IRA?