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Posts: 3
Registered: ‎02-08-2017
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Thrift Savings Plan

Does anyone here contribute to the Thrift Savings Plan (TSP)?  I'm looking for advice as I'm fairly new to Traditional and Roth 401K, and made the awful mistake of not investing from 2004-2014 when I was on Active Duty with the Marines.  I started with the Federal Government at the end of 2014 and began investing 3% a check.  Here is my current participation:

 

5% contribution (5% match) per check / bi-weekly (26 payments/yr)

Participating in Traditional (tax deferred)

Salary: 63,806, step increase next month to 65,864

Annual Raise: 2.1% on top of step increase

Years to retirement: 28

Invested in L2050 fund  (16.38% return in last 12 months)

Current balance: $7200 (took out a $2k loan last year, paying back until May)

 

I plan on increasing my contribution 2% every step increase, and 1% every annual pay raise (if we get one).  After I pay bills for the month, we sit at about $1200 left over for money to play with, but I am currently saving for a house and related expenses for purchase, emergency savings fund, and paying off my remaining debt (approx $10k).   just want to know if my plan seems proper or if I should tweak it at all.

 

Thanks!

FICO 8 as of 2/6/17: 598 EX 620 TU 584 EQ


Community Leader
Senior Contributor
Posts: 3,456
Registered: ‎07-17-2014
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Re: Thrift Savings Plan

One great option you have as a contributor to the TSP is to place all of your funds inside a TSP Roth vehicle -- up to 18k per year.  A Roth option tends to exceptionally good for young people -- once you pay the initial income tax on that money it grows for the rest of your life text free.  With a conventional TSP (or IRA or 401k), by way of contrast, you simply defer paying the tax now, but all of the money will be taxed eventually (when you take it out).

 

The TSP is unusual in that sense, as far as I remember.  Its counterpart in the private sector is the 401k, and the way that most employees 401k plans work is that they only have an option to place their 401k money in a conventional tax deferred vehicle.

 

William J Bernstein is IMO one of the best writers about retirement planning and investment around and he writes (in The Investors Manifesto):

 

"Want to join investing's real aristocracy?  Become a federal employee and get access to the government's Thrift Savings Plan, who's funds charge an amazing 0.015 percent..."

 

So you have really lucked out.  Incidentally he wrote a really accessible book recently that may be right up your alley:

 

https://www.amazon.com/If-You-Can-Millennials-Slowly-ebook/dp/B00JCC5JKI/ref=la_B001H6ID14_1_5?s=boo...

 

 

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