Maxing TSP

[CF]

You gotta refinance that shit...I'm getting 1.75% right now, my interest rate on my student loans ($55k) is only $100/mo.

Yeah that’s pretty good! If I can’t make significant progress before may on getting it paid off I’ll look at that.

 

[BDUB]

I always tell folks to do what you want to do. As it relates to saving or spending someone's hard earned cash, I'm not ever going to attempt to change someone's mind. But here's my story...

I maxed-out TSP contributions from day one as a DoD 2152, GS-11 Step 1 - which was roughly $50,100 per year. That was pre-SSR DoD pay and TSP contributions were limited to a percentage of salary instead of dollar amount. That's pre-2004 for those of you not in the know.

I wanted to max-out TSP contributions from day one for three reasons: 1) I am a simple person that grew up dirt poor and developed very simple wants; 2) I planned to retire when I was first eligible... at age 50 with 20+ years of creditable time; and, 3) I was living in an area of the country with a state/local income tax and I wanted to take advantage of contributing pre-tax earnings to limit tax liability.

- Simple wants. I don't have any fancy or expensive "toys" and I've always paid cash for everything I've bought (except my homes... because the mortgage interest tax write-off helps to reduce tax liability). I've never wanted a fancy car, his-and-hers jet skis, or a fancier boat; a trip to Vegas or the local casino; or $15k mountain bikes or $5k golf clubs. The conversations in the facilities I've worked at about 'who-has-what' have always interested me but I just kind of nod and take note.

- Retirement. It's actually quite simple yet so difficult for air traffic controllers to comprehend. Let me explain it like I would to a eight-year old: On your first day of work as a 2152 (FAA or DoD), you are on an expiration clock. The expiration clock I speak of is mandatory retirement. And the more money you can put away earlier in your career, the easier it will be to wake-up when you're eligible to retire and say "f*ck this, I'm outta here." I don't want to "retire" and have to turn-around to work in a contract tower to make ends meet. Compound interest is not some magical puzzle that can never be solved; it's actually a beautiful thing that produces beautiful results.

- Limit tax liability. Enough said. F*ck taxes. And I've tried to find the benefit in contributing to the Roth TSP option, but I haven't yet... at least in my financial situation. I just cannot foresee needing more money for day-to-day living in retirement than I need today. And since I plan to "earn" less annual income in retirement than I currently do, the tax benefits to investing via the Roth option are not really suitable for me as I intend to be in a lower tax bracket after retirement. Of course, federal tax legislation could change things up but I will take that change as it occurs and then adjust fire.

While I am not currently eligible to retire (too young, not enough years), I have reached seven-figures in my TSP account and I have another good 5-10 years left in me. Or, I could wake-up any day after I reach retirement eligibility and say "f*ck this, I'm outta here." But you do what you want to do. You'll get no lip from me.

I do the Roth for tax purposes but I guess I’ve never thought about being in a lower tax bracket by the time I actually want that money. You’ve got some solid points made here though I’m trying to do the same exact thing. Hopefully kids and a wife one day don’t take half of it ?

 

[AnyTrafficPleaseAdvise]

This is such a wholesome thread. The concepts are generally very simple, but it’s easy to get sucked in and spend more as we make more. There is something to be said about living a little and having some fun because we are pretty well off financially compared to most once we’re at a higher facility. Since we’re giving financial advice I’ll share some tidbits a wise man once told me and they’re pretty straightforward.
1. Live below your means.
2. Save up an emergency fund that can pay all your expenses for three to six months.
3. Make more than the minimum payments on your debts and knock out the principal faster.
4. Once you pay your debt off, take that same monthly payment amount and invest it.
As others have stated, this student loan interest moratorium is a godsend and the opportunity of a lifetime to pay off thousands of dollars interest free. Take advantage!

 

[echster]

I do the Roth for tax purposes but I guess I’ve never thought about being in a lower tax bracket by the time I actually want that money. You’ve got some solid points made here though I’m trying to do the same exact thing. Hopefully kids and a wife one day don’t take half of it ?

Free lesson for anyone: If you already have an established TSP account or similar investment account before you get married and/or have children, you need a prenuptial agreement. Period.

I got married later in life than most and I would not have gotten married without a prenuptial agreement. The legal fees pale in comparison to what I feel I've already made. Currently, only 20-22% of my TSP account is divisible as community property in the event of divorce. The rest was walled-off as community property as I brought it into the marriage. And that walled-off portion that grows is also mine and not considered community property.

Prenuptial agreement. Prenuptial agreement. Prenuptial agreement.

 

[Motodog]

Free lesson for anyone: If you already have an established TSP account or similar investment account before you get married and/or have children, you need a prenuptial agreement. Period.

I got married later in life than most and I would not have gotten married without a prenuptial agreement. The legal fees pale in comparison to what I feel I've already made. Currently, only 20-22% of my TSP account is divisible as community property in the event of divorce. The rest was walled-off as community property as I brought it into the marriage. And that walled-off portion that grows is also mine and not considered community property.

Prenuptial agreement. Prenuptial agreement. Prenuptial agreement.

Prenup makes all the sense in the world, it’s jus that it goes over like a turd in a punch bowl

 

[DankVectorz]

Prenuptial agreement. Prenuptial agreement. Prenuptial agreement.

My lawyer friend only gives out two pieces of advice for free; never live somewhere with an HOA, and never get married without a prenup.

 

[echster]

Prenup makes all the sense in the world, it’s just that it goes over like a turd in a punch bowl

I'm not in disagreement. But I brought into a marriage more than $1.3 million in total assets. And being able explain that in an adult conversation with my now-wife made her understanding. Turd in a punch bowl or not, I don't mind having adult conversations with anyone.

 

[Electricfence]

I max the Roth for 4 reasons:

1) lowering my tax liability doesn’t do a whole lot for me. Yes I would pay less taxes but not a whole lot less. My spouse makes as much as I do and will make more the older we get.
2) I can’t contribute to the Roth elsewhere unless I back door, and that appears likely to go away.
3) I don’t plan to use it in retirement. There is no mandatory withdrawal starting above age 70 like in the traditional, which the govt contribution and growth is so I’ll have to withdrawal that. Our pensions and other investments will keep up financially healthy well past old age.
4) it passes to my kids tax free. If I don’t use it and continue to invest it wisely and safely they will have well over 2 million each.

One big if though, All of these Roth benefits will most likely go away iMO. The government thinks it’s dirty money and will want to get their hands on it at some point. I’m just hoping that won’t happen. Worst case I believe I see them taxing it like regular cap gains, 20 percent, which is still less than I pay now or close to it. So whatever.

 

[Dolan]

$20,500 tax deduction. Or tax free growth if you do Roth TSP. Only thing arguably better is Roth IRA, but that’s only $6,000.

Ok yeah this is what I was getting at. After the agency match you should (imo) max a normal Roth IRA as it's much more flexible as to how you invest the money than the TSP options

 

[MJ]

There’s several reasons not to max tsp contributions. In the end it’s only one of the tools out there and it might not be the most beneficial for an individual. Go to a federal retirement seminar as early in your career as you can, they explain a lot of things that you might not even know to think about.

 

[Kramer]

There’s several reasons not to max tsp contributions. In the end it’s only one of the tools out there and it might not be the most beneficial for an individual. Go to a federal retirement seminar as early in your career as you can, they explain a lot of things that you might not even know to think about.

I went to the natca sponsored retirement seminar. The planning one, not the one for older controllers. He emphasizes 4 main points. Max ROTH tsp. Cancel fegli for cheaper/better term life. Buy back military time. And if you ever been divorced get that paperwork to OPM.

While I agree what you said, I will also say if you do believe in the benefits of Roth, the tsp is great for that since it allows you to get 19.5k/yr into Roth. If your not a ROTH person then only investing the minimum to get the match, you have more flexibility.

I'm curious if you got more/different information at the seminar?.

 

[MJ]

I went to the natca sponsored retirement seminar. The planning one, not the one for older controllers. He emphasizes 4 main points. Max ROTH tsp. Cancel fegli for cheaper/better term life. Buy back military time. And if you ever been divorced get that paperwork to OPM.

While I agree what you said, I will also say if you do believe in the benefits of Roth, the tsp is great for that since it allows you to get 19.5k/yr into Roth. If your not a ROTH person then only investing the minimum to get the match, you have more flexibility.

I'm curious if you got more/different information at the seminar?.

Yeah, I went to a different one. I'd be wary of any blanket statements that say "do this" to an entire group of people. I'm going to assume he was generalizing and dumbing it down a bit because that's probably ok advice for someone who doesn't want to think about it too much.

The one I went to went over the benefits and drawbacks of all the different options, potential/upcoming changes in laws, things to consider, answering questions etc., and not so much of "you should do this."

 

[GulfCharlie]

My lawyer friend only gives out two pieces of advice for free; never live somewhere with an HOA, and never get married without a prenup.

I hate my HOA with the passion of a thousand burning suns… of course they feel “entitled” to plug in and use my built in home generator when the power goes out.

 

[rugbydog11]

I hate my HOA with the passion of a thousand burning suns… of course they feel “entitled” to plug in and use my built in home generator when the power goes out.

I could never live in a neighborhood with an HOA, but a condo/townhouse would make sense to me... I pay a lawn care service at my house, so it would make sense to me for an HOA to cover lawn maintenance and such.

I max roth since I was making about 75k. I also front load a bit during the first 5-6 paychecks because I don't need the money during the dead of winter, and I'm not paying for lawn care!

 

[jdatc]

I didn’t max my TSP for the beginning years of my career because I was hardcore BASE jumping and thought I wouldn’t survive it. I used to jokingly refer to my government life insurance as family party money since they were the only policy that would cover me.

However I still contributed about 80% of the max just in case I quit and did survive it. Also being at a 12 I got a good amount from the government’s donation/match so that was nice.

Then once I quit I maxed it out lol. I probably cost myself a couple hundred thousand based on back of the envelope math but I’m still in excellent shape and marrying a successful spouse helped a lot.

To each their own. Enjoy your life. Nothing is truly guaranteed.

 

[Mike Kilo]

I could never live in a neighborhood with an HOA, but a condo/townhouse would make sense to me... I pay a lawn care service at my house, so it would make sense to me for an HOA to cover lawn maintenance and such.

I max roth since I was making about 75k. I also front load a bit during the first 5-6 paychecks because I don't need the money during the dead of winter, and I'm not paying for lawn care!

Don’t front load so much you miss out on the 5% match in the last pay period! ?

 

[TimShady]

Ok yeah this is what I was getting at. After the agency match you should (imo) max a normal Roth IRA as it's much more flexible as to how you invest the money than the TSP options

I agree. If you can’t afford to max both right now, it’s not a bad idea to get the TSP match, then max out a Roth, then go back and do as much as you can in TSP.

 

[wand_waver]

For 2022, since the contribution limit went up, how much did I need to put per paycheck in Roth to have it maxed?

 

[jakemorrill]

Employee Express will tell you.

 

[DankVectorz]

For 2022, since the contribution limit went up, how much did I need to put per paycheck in Roth to have it maxed?

788 per paycheck