Thread: Just joined the ANG, what to do w/ bonus???

Why would it be tax free?

I don't know - according to the finance department, if I role the bonus money into the TSP, I won't get taxed (whereas if I take the cash, via direct deposit to my checking acct, I will)... Any thoughts?

Originally Posted by dave1231959

Why would it be tax free?

I believe Tax Deferred is the correct term if it goes in to TSP or for that matter any IRA type instrument. When it's witdrawn taxes will be due.

OK44 if you think you will make decisions requiring you to pay it back, put it somewhere you can get at it without penalties. If you do have to pay it back, what about taxes then? Anyone?

Thanks for serving.

Originally Posted by Okibono44

Ok, I have $15,000 to play with. Should I put it in the TSP tax free or should I take the cash after taxes? I'm not sure what tax rate it gets nailed with if I opt for the cash...

Any suggestions? I want to make sure that if I decide to separate or change career fields, they don't come asking for the $$$ back and I don't have it readily available.

Thanks!

Back in 2001 I re-enlisted in a tax free zone and stuck my tax-free bonus in TSP. Looking back, I would only recommend TSP if you know you'll do 20 years. Once you leave the government (or if you got medically discharged) you won't be able to contribute money into TSP.

At this moment, in light of recent tax-infested-Obama-induced events it looks like a ROTH IRA is a better choice if we know we can avoid higher taxes in the future.

Whatever choice you make, good luck!

Get the tax issued resolved. Its great you joined the ANG. My daughter is in the guard in a full time position.

I don't know what area of the country you live but I would likely take the money to Atlantic City or Vegas. Spend a few days there and enjoy the sights and hobnob with the rich and famous. Then put most of the money in the $5.00 slot machines. I wouldn't join any high stakes poker games. There are some beautiful women there (and some men who like dress like them, be cautious. Otherwise, I can't think of a better place to put your money than in the TSP.

Ha! Thanks for getting back to me, I might consider gambling it all away... lol

First, I do plan on making this a "back-up career", therefore I think thus far placing it inside the TSP would be the most logical way. Why? Well, if I roll the TSP to my current employers 401k plan, and I need to repay the bonus, its only a 10% penalty plus capital gains tax on the 401k/IRA/TSP... Versus the savings, CD, or checking route which would already incur the massive tax penalty upfront.

Only make the full $15K into the TSP if you know you are not going to need the money until retirement. We've had a number of people here think they can put it in the TSP, and then decide later to pull it out for whatever reasons (need to pay bills, want to buy a new car, etc, etc, etc) and don't understand the potential tax liability, including early withdrawal penalty, if they wanted it out before they hit retirement age.

That said, TSP is a great investment for the long haul.

Finally, take a look at options with a Roth account. If you are in a low tax bracket, and expect to be in a higher tax bracket later in life when you are ready to take the money out, then a Roth can make good sense for you. Under Roth, you invest taxable money, and get it out at the end without paying taxes on the gains. Under a traditional 401(k) or TSP, you don't pay taxes on the way in, you pay as if it is taxable income at the distant end.

Most folks roll their outside 401(k)s INTO the TSP, because it has low costs, gives them good access, and is easy to manage. Yearly costs are tiny compared to any outside 401(k). The downside is the limited number of options to put it into- i.e. no gold fund, no sector specific funds, etc.

Your choice.

Study, and make an informed decision as to what is best for your situation. Talk to a financial planner too- not one that sells products, necessarily, but one that can look at your situation, and offer you choices.

Personally, I have talked to USAA- they have a free financial planner available to do an initial counseling, and then also can give you a "for a fee" counseling session where it is all laid out for you. USAA is available to all current military members, and is worth looking at.