Retirement TSP Tips/Tricks

The only reason to go traditional would be to lower your current taxable income. That could be useful in certain situations, but you would have to have a really good handle on your taxes to know how much to contribute.
 
There are plenty of reasons to go traditional aside from lowering your current taxable income. Keep in mind your Roth TSP contributions are taxed at your current income bracket. If you're at a 10+ making bank, that can be pretty high. If you're not planning expecting to be in that high tax bracket after your retire, it can save you a lot of money by paying tax later in a lower tax bracket.

Bottom line to anyone on here, everyone financial situation is different. Different goals, different amount of years eligible to work etc. Go see a financial advisor/planner before taking advice from anyone on the interwebz
 
I know you can withdraw from your TSP without penalty at 59 1/2, but I recently heard that as ATCS we can do it at separation. I can't find that written anywhere on the TSP site and haven't been able to get to any of the NATCA seminars. Can any of you lovely people provide any further information on that?
 
KnockKnock said:
I know you can withdraw from your TSP without penalty at 59 1/2, but I recently heard that as ATCS we can do it at separation. I can't find that written anywhere on the TSP site and haven't been able to get to any of the NATCA seminars. Can any of you lovely people provide any further information on that?
Click to expand...
You can pull out if you separate the year you turn 50. If you retire prior to that year you must wait to 59.5 to avoid penalty. It's on opm.gov somewhere... I'll look around
 
“Older controllers today have tip that I put more into riskier funds while I'm young like the C.”

Lol

Here is a tip you won’t hear from any old dinosaur controller or even a financial advisor unless they intimently understand our career. Don’t heavily invest in aggressive things like the L2050 fund while your young...... do so your who career, even when you are 55 and later.

Traditional advice suggested people invest in risky, aggressive things when they are young and dial it down to 2-3% growth G fund like things as they are older and retire when they can’t afford the loss and need the money to live off of. But that assumes you don’t have a pension, and will retire at 65-67, needing to live off that fixed income for 10-20 years or so.

But that don’t apply here, if you retire at 55 you should still plan for 30 years or more to live. So it’s a bad call to dial it down to the G fund at that point and sign up for 2% annual gains. You have a lot do time to live and a pension to buffer a bad year or two, keep the investments very aggressive and over 30 years and unless there is a nuclear war you will easily average 6-7% gains vs the 2% you would have gotten following the traditional rules which don’t apply to us. A few old controllers about to retire at my facility did things the old way and I can’t believe nobody ever told them otherwise, they even dialed it all down a couple years back so they just missed the rocking increases under the Trump economy. My plan will allow you to withdraw more, and leave more to your “army of kids”. This simple advice will net you hundreds of thousands more over the course of your retirement, and would have under any 30 year period since the stock market existed.

PS- to the “army of kids” guy who thinks he is going to withdraw 5% a year and still leave “a few million” to the army, you better check the math man. Maybe your wife is a medical doctor or you inherited lots of money, or you bought lots of Bitcoin at $50 a share and sold it at $12,000, but if not I don’t care where you work because even if you are the Administrator making 189K a year maxing contributions since you were 25, there is just not enough time in this career to accumulate “millions” of dollars in a TPS regardless of strategy or how lucky you get. That’s why we get the expanded pension benefits and other things to offset that.
 
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breakaway2000 said:
Prepare for a wall of text

Get out of the L2050 ASAP.

Outlined Steps and I'll go into detail below...

1. Allocate 50% in the C and 50% in the S. Set it and forget it.
2. Max out your TSP as soon as practical ($18,000 per year EDIT: $18,500 starting 2018.)
3. Allocate 50% in a traditional TSP (pre-tax, taxed on withdrawal) and 50% in a Roth (Taxed going in, earnings are untaxed).
4. Upon retirement, keep your money invested, withdrawal 5% per year.

Detailed reasons

1. Allocate 50% in the C and 50% in the S. The C fund mirrors the S&P 500 which is a collection of 500 stocks which best represent our US economy as a whole. The average annualized return of the S&P 500 over the last 90 years is 9.8%. It's the basis in which all mutual funds are compared (did they outperform the S&P? etc.). The S fund mirrors the Dow Jones completion stock market index, which is a collection ~4,500 small to mid size stocks (excludes the 500 stocks in the S&P 500). By investing in both equally you have the security of the C fund and the potential for growth in the S fund. The I fund has consistently underperformed both the C and S fund for decades. I would not advise putting a cent into the I fund.

2. Max out your TSP as soon as possible. To be frank, each year you don't, you cannot get back. Given the fact we can retire when we're 50, those early years are so vital. For instance, you're 25. Lets say this year you're able to contribute 10k. It's not that you didn't contribute the additional 8k this year, you didn't contribute 8k x 25 years of compounded interest. Assuming 10% interest, over 25 years that 8k would've turn into $86,678. I'd encourage anyone getting into the agency to try to adjust your budget/spending while in training. While in training, with each step you achieve D1/D2/D3/CPC, pay yourself first. Put it in your TSP.

3. Allocate 50% to a tradition TSP and 50% in a Roth. A Roth = a traditional if the tax rates are equal. In a traditional TSP, the amount you put in is pre-tax, when you withdrawal the amount, it will be taxed. As a traditional lowers your taxable income, the amount that is taxed comes off the highest part of your income. As most of us will be making more while working then in retirement, there is a strong possibility that your tax rate will be lower in retirement then while you're working (which would favor a traditional). You can view historical tax brackets adjusted for inflation if you want a deep dive. Now, if you believe tax rates have the ability to increase in the future, investing in a Roth helps mitigate that risk. Money you put into a Roth is post-tax. All your earnings that you withdrawal are tax-free. Why you should invest 50/50? We do not know what tax rates will be in the future. Anyone who tells you otherwise is lying to you. Unfortunately, you cannot withdrawal directly from the Roth or directly from the traditional portion of your TSP, the amounts have to be withdrawn proportionally. Even with that, it helps to mitigate risk as some years would've have been beneficial to be entirely in a Roth and others years would've been beneficially to be in a traditional TSP.

4. Upon retirement, keep your money invested in the market and withdrawal 5% per year. This is how you create generational wealth. If you transfer your money into the G fund or remove it entirely and put it into a savings account, your money has an expiration date. It will run out. If you withdrawal 5% a year, that's a 20 year lifespan. With the market, on average, earning over 9% interest per year, if you withdrawal only 5% of your investment yearly, your money will continue to grow over time. For most of us, our goal is 30 years. Retire at 50-55, hope to live til 80-85. Since the great depression, there has never been a 30 year span where if you withdrawal 5% of your income per year, you're left with less then what you started with. Think about that. You start out with 1,000,000, withdrawal 5% a year for 30 years and at the end of 30 years, you still have more then 1,000,000 invested.

I'm glad you brought this up. It's a great conversation to have and too many people are not educated about it early enough in their career to truly make a difference.
Click to expand...


Than*
 
That’s strange man, as bad as the last two weeks sucked Dow Jones is still up 19.8K to 24.8K or 25% since the “Trump Economy” started, you must really have invested weird.
 
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I figured I was reading it wrong. Anyways. Personally I didn’t do so well moving my money around and ended up using a tsp service that sends me an email every so often advising me where to allocate my money. I was up to 18% pip until this last update in October. It since went down to just under 9%
 

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