I believe TSP is similar to a 401k. You put in money pre-tax, government matches a portion of contribution (so you put in money, government puts in more on your behalf). If you make $20,000 and put in 5% ($1000), you are only taxed on $19,000 (20,000-1,000). You will barely notice a drop in pay (because that $80/month would get taxed and put only around $40-$60 in your pocket). And if the government matches dollar for dollar, the $1000 you put in gets a $1000 match from government, so you have $2000 invested.
I second opening an IRA. I would probably use a Roth, but could see using a deductable IRA as well. Do you see your income exceeding $66100 anytime soon (in retirement?).
If you think you will generally spend less than $66100 (in todays dollars), use the deductable and avoid paying taxes now at all costs.
If you think your income will increase above $66100 in retirement, pay taxes now, open a roth IRA, and never pay taxes again (on that money).
$66100 is the max income in 15% tax bracket. More than half the country earns less than $66100. Are you in that majority? The $66101st dollar is taxed at 25%.
As for investing, you need to decide an asset allocation.
I am 35 yo. My allocation is 72% domestic equity, 25% foreign equity and 3% bonds. Every 6 months I add 1% to bonds, but I am probably within 20 years of retiring. You won't NEED bonds unless you want to take on less risk.
My equity allocations are
domestic:
large cap 42%
mid cap 15%
small cap 15%
foreign
large cap 15%
small cap/emerging markets 10%
My bond allocation is one fund (3%) which owns about 15% foreign bonds and 85% domestic bonds and dividend paying stocks.
My blog has my holdings if you need fund recomendations.
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One person's stupidity is another person's job security.
Last edited by jIM_Ohio : 06-11-2008 at 01:06 AM.
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Planning For The Future?!
