MIL Roth IRA or TSP?

Discussion in 'On Topic' started by NisAznMonk, Dec 14, 2007.

  1. NisAznMonk

    NisAznMonk New Member

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    Spoke with a USAA rep and they convinced me to open up a Roth IRA with them for $20. I figured I won't miss $20/month and this is going towards my future retirement income.

    Now the rep goes on and tells me that the TSP is not a good thing, and that I should stop contributing into the TSP. Instead I should roll the TSP over to my Roth IRA @ USAA...and continue to contribute my wimpy 5% a month into the IRA. Is this something I should even consider? All I know about my TSP is that it is divided up evenly between some sort of L fund, S fund, and I fund. I don't know anymore than that because I can't view my account online (waiting on the password to come in the mail).

    Anyone have any advice?
     
  2. airbatt

    airbatt New Member

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    Listen to him, he is correct
     
  3. NisAznMonk

    NisAznMonk New Member

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    How come he is correct? Just because he said so?
     
  4. NisAznMonk

    NisAznMonk New Member

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    Just talked to the TSP lady, and now I can see my account online.

    According to my LES I've contributed $1994. The TSP balance $2000.31. Am I doing something wrong?

    [​IMG]
     
  5. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    Lets see some proof.
     
  6. BlackHBDX

    BlackHBDX The grey fixer

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    You're not doing anything wrong. Remember these are long term investments, like 20-30 years. What you want is slow growth over time. Don't get too caught up in what the value is on any given day.
     
  7. tunes

    tunes OT Supporter

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    thats the way to go
     
  8. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    Low down and dirty on the TSP:

    The TSP provides different funds for you to invest in, much like what a bank would offer. Each fund is usually comprised of several other funds from the stock markets.
    Here is a primer on the funds offered by the TSP.

    The G fund is the default fund that your money goes into when you first sign up for the TSP. It is the safest fund, in that it is guaranteed to increase by a small percentage a year (usually 4-6%). It can guarantee returns because it is based on US Treasury Bonds.

    The F fund is a little bit more risky than the G fund, but still mostly a safe bet. The F fund is based on government and corporate bonds. It has averaged a 6.3% return rate over the past 10 years.

    The C fund is more riskier than the F fund, because it contains stocks of medium to large US companies. As the stock market rises and falls, so does the returns of the C fund. This is the first fund in which you can receive dividends. The C fund also is more prone to market prices. This can be a good thing, depending on your situation. The C fund has averaged almost 10% return over the past 10 years. It is comparable to the S&P 500.

    The S fund is more riskier than the C fund because it contains stocks of small to medium US companies, whose stock tend to be more volatile. The S fund is comparable to the Dow Jones 4500. It has averaged 11.3% return over the past 10 years.

    The I fund is the most volatile fund because it contains foreign stocks. This fund can change in value due to the market of the stocks and also because of the fluctuations in currency exchange rate. It has averaged 9.4% return rate over the past 10 years.

    L funds are just compilations of all of the above funds. The year the fund "matures" is part of its name. When it is young, most of your money is in the riskier funds, as it matures, it shifts the money to the lass risky funds until eventually most of your money is in the G and F funds. This allows you to take advantage of the high rates of return years decades before you need it. When it comes time for you to withdraw money from it when you are old, it will be secure and (hopefully) a large sum of money earning around 6% a year.

    Wait, there's more... when you open any fund with any company, they are going to make money off of you. So the question is, how much do they charge? The answer is in the Expense Ratios. The larger the Expense Ratio, the more money it costs to invest in the fund. I did a quick look at funds with low ratios, but performance equal to better than the S&P 500. The top of the list is a bond fund that has an Expense Ratio of 0.07 and a Year To Date (YTD) return of 5.53%. In comparison, the TSP had an Expense Ratio of 0.03 and you can pick whatever fund you wish. The TSP allows you to indirectly invest in some of the same stocks that are offered by USAA or other companies, for less money.

    When people say the TSP is a bad idea, unless they can come to the table with numbers and percentages, they usually are repeating what someone else told them.

    The TSP is not bad! Can you earn more money by investing in other financial products? Yes, it is possible. Can you find better performing funds with less cost? Doubtful.
     
  9. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    Also remember that past performance is not a promise of future results.

    Either transfer all your money to the L fund or remove it from the L fund and distribute to the others.
     
  10. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    2000.31 -1994 = 6.31
    You have earned $6.31 off of your $1994.
     
  11. Drunk Bastard Audio

    Drunk Bastard Audio New Member

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    I do both IRA and TSP..why'? simple, if you invest in the right TSP fund, you'll make out alot more then any IRA/Mutual Fund can pay out. But however, an IRA is a solid investment. I figure I'll insure my TSP with the IRA.




    for those interested in TSP...look into the I fund.
     
  12. NisAznMonk

    NisAznMonk New Member

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    Do you think it would be smart to go 50% TSP and 50% Roth IRA? I'm hoping to put away a total of $250/month starting in Jan 2008.
     
  13. MrRyan

    MrRyan Gary Johnson 2016 OT Supporter

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    In my mind - it's all about what you need for your tax posture.

    TSP is essentially the same vehicle as a regular IRA - it "hides" your income. If you put $5k/yr away into a TSP, your annual taxable income is now $5k less.

    A ROTH IRA invests money "Post Tax" and is withdrawn after retirement, tax free.

    If you're not Maxing your TSP contribution annually - then there's no real need for Roth IMHO - unless you're banking on needing tax free withdrawals after 65. IIRC the maximum contribution for for pre-tax contributions is $15k/yr?
     
  14. NisAznMonk

    NisAznMonk New Member

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    TSP has a $15K max contribution? My E-3 pay for the entire year is that much BEFORE taxes :rofl:.

    I set up a Roth IRA through USAA, and the rep recommended this one to start with:

    [​IMG]

    I only put in the minimum of $20, and I plan on only putting in $20/month until I get more money. You always hear about diversifying your money for retirement and whatever. Is the TSP and the USAA Roth IRA a decent start?
     
  15. Jyokker

    Jyokker The trouser snake is very aggressive. It will corn

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    If you are looking for diversification, any broad mutual fund will work. If you do TSP and a different mutual fund in the Roth IRA, then your diversification will be great.
     
  16. NisAznMonk

    NisAznMonk New Member

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    So when it comes to taking out that $5k will I be taxed at the rate that I'm at in 2007? Or will it get taxed at the rate the day I decide to pull it out?
     

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