I apologize if this question is stupid. I am new to retirement savings accounts and about to enter the military workforce. I hope to get to boot camp (navy) in late September, so these numbers consider that.
I will receive a 25k bonus right after it, so I plan to invest this into my TSP ( either Roth or traditional, depending on your recommendation). If my planning is correct, here is my plan for my contributions.
Investing 100% of my bonus to a Roth TSP = $19,500 — after a 22% tax
5% contribution match from Roth goes to traditional: [$1151.15]
Invest 5% of my E3 pay into a trad TSP 2,377.5 -> 118.88 x 3months = [$356.63]
Invest 52% of the rest of my salary to Roth TSP to max it: 2,258.63 –> 1,174.49 x 3 = [$3523.46]
Keep in mind that these numbers are based on three months of salary from the end of September to December.
In total, my Roth tsp will be at $23,023 while my Trad TSP is at $1,507.80
My traditional TSP is that much if you add the 5% contribution from the Roth TSP since I read that it was added to the Traditional TSP due to tax reasons. These estimates are based on what I've learned, so could anyone correct me if I am wrong or if I should invest another way? Thank you guys in advance
Should I max my traditional or roth tsp. Also is my math correct ?
byu/TopCryptographer4089 inMilitaryFinance
Posted by TopCryptographer4089
5 Comments
Roth
From what I understand DFAS will only match 5% of BASE pay not bonus at all, and the 5% matching will start after a couple of years. You should get 1% matching as soon as you join and the extra 4% later on
1% automatic contribution starts after 60 days.
Agency match up to an additional 4% starts in 25th month of service.
https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/BRS%2520New%2520Accessions%2520Course/Uniformed%2520Services%2520Guide%2520to%2520BRS.pdf
Leave something to live on and enjoy life, maxing out TSP in your first year is difficult for officers and much more difficult for enlisted due to lower pay.
If I have a Roth on Robinhood card I have a Roth on TSP?
As a general rule of thumb Roth is preferred over traditional until you hit 22% bracket. There are other factors including state taxes but thats a good place to start.
I would recommend funding a Roth IRA (outside of TSP) with part of the bonus. If you ever need the $ contributions can be accessed tax and penalty free. Only do it if you have discipline to follow through, wont frivolously spend it, and use a low cost broker and buy low expense ratio index funds. Otherwise, stick w TSP until you know what you’re doing.