Newbie needs direction

[Ralff]

I am a military member currently serving in the Air Force. I plan on retiring in 16-18 years. Right now some of my income (10% of my base pay) is being directed into an account in the Thrift Savings Plan (TSP). After chatting with some co workers, it seems that my money may be better invested in a different program. I've never really researched other types of investments so I'm pretty much clueless on what type of savings I should be looking into. I was looking around on Google and came upon this site. So now here I am asking for some direction on where to direct my money. My primary goal is to be able to retire and not have to get another job after retirement. I don't expect to be wealthy but I would love to supplement my income enough to pay the bills and instead of working, go fishing all day.

[kork13]

Welcome.

The TSP is an outstanding option for service members who want to save for retirement but don't need/want to babysit their retirement savings. It's simple (just five funds, which follow indexes for the full spectrum of the market), easy to set up, allows automatic contributions, and the expenses are unmatched anywhere -- less than .02% in annual expenses! True, there is no matching contribution from the military, but such is the case for many people working in the corporate arena. Finally, of course, TSP contributions are tax-deferred, so they lower your annual tax burden by contributing to it. Also on that note, the TSP automatically tracks what money is contributed from tax-exclusion zones (primarily during combat deployments), which simplifies things significantly come time to withdraw.

The only better option you have is a Roth IRA (which I would recommend that you ALSO look into -- not to replace, but to supplement your TSP retirement savings). You can open one up with USAA, Vanguard, Fidelity, Charles Schwab, or one of the many other online discount brokerages. Money contributed to a Roth IRA is taxed as usual, but then any growth/earnings in the future will not be taxed, even when you start to withdraw. Particularly for a young military member still early in your career, a Roth is a great idea to get started, and if possible, you should do your best to max it out every year.

I'm in the military as well, and have only been active duty for 1.5 years. For me, I first make sure that I can max out my Roth IRA ($5000 this year, so $416/mo), then contribute an additional 5-10% of my base pay to the TSP. That allows for tax diversification, and also lets me take advantage of both very good options. In my personal opinion (take it for what it's worth), I'd recommend you get into a Roth IRA, but still continue contributing to the TSP.

[creditcardfree]

I would agree with kork that the TSP is not a bad thing. We are military, too. We max out our Roth IRA's with $5000 each. My husband puts 7% of his base pay into the TSP. We have our Roth IRA's at Vanguard.

It is also important to have money set aside for an emergency. If you don't have money set aside for this, it would be a good idea to start one. You want to keep emergency money in an account that you can access with out any tax penalties. A savings account, money market account or a certificate of deposit would qualify as a good place for this money.

[Ralff]

Hi folks, thanks for the replies. I may have to question the guy that told me the TSP wasn't that great on WHY it's not that great the next time I see him. Everywhere I've looked seems to say the same thing: TSP is a good thing.

Next, I found out my dad actually started me a Roth right after my high school graduation (10 years ago). While the money in it is not much even with 10 years to grow (initial contribution was about $250 and none since), it's nice to know that I don't need to start one but instead just contribute to the one I already have. Edward Jones I think is the name of the company.

[disneysteve]

You may or may not want to stick with the Edward Jones account. Look into what investment options they offer and what costs are involved. I'm not familiar with them so I don't know if they do load or no-load funds. If they are load funds, transfer your money out of there to a no-load company like Vanguard, Fidelity or T. Rowe Price.

[terces]

We did the TSP during hubby's time in the Navy. I definitely recommend it to. Think of it as your personal 401K an employer would give you.

Now that he is separated from the Navy, we are in the process of rolling ours into a personal IRA account to have more say in the funds we invest in.