BLUF: For those who max their TSP, are you doing that and foregoing other investment vehicles?
I’m always shocked when people say they are maxing out their TSP. I currently contribute 5% to get the match. At my current rank I would need to contribute 29% to max. I suppose I could, but I feel like that would take away from other investment opportunities, listed below.
- Roth IRA already maxed (usually max it in 6 months).
- $1500/mo in index funds taxable brokerage
- $1400/mo in diff savings buckets (building HYSA to $50k then stopping, & saving for wedding)
- set aside $1200/mo for guilt free spending (I travel a lot) and whatever I don’t use rolls over into savings.
My fixed expenses are about 34% of my income which is why I’m aggressive with the rest.
Am I focusing too much on my taxable brokerage/HYSA?
Maxing out Roth TSP takes away from other investments?
byu/romeoalphaecho11 inMilitaryFinance
Posted by romeoalphaecho11
8 Comments
If you like paying taxes, go for it. I prefer to pay as little taxes as possible, which is only possible within TSP/IRAs.
The accounts are tax advantaged, unlike regular taxable brokerage accounts. There’s a reason the well-known advice is to get the match, max IRA then max TSP (401k). There are exceptions to this rule if you are saving for something specific, but as far as taxes go, TSP/IRA wins all day long.
It really all depends on your goals. If you are planning on working until at least 59.5 and aren’t using the brokerage account as a mid-term savings for a house or something then yes, you are not investing optimally. In this case (waiting until 59.5), tax advantaged accounts will almost always beat a taxable brokerage, and they are never worse. Especially if you plan on doing the full 20+. Even if planning an earlier retirement, there are ways (72t, etc.) that will allow early access to 401k/TSP and IRAs.
That said, you are socking away quite a bit, so this is more of “you are only getting an A- or A instead of an A+” more than it is “you’re failing”
Depends on your goals. Maxing retirement accounts meets our goals at the moment.
What’s the taxable brokerage account for?
Roth TSP and Roth IRA (index funds s&p500) at the moment with two HYSA for emergency savings and another private savings. Might open some different accounts down the line when I gain more knowledge on it but those are pretty firm and reliable options.
*New LT so very young and not maxing either out yet
I max Roth IRA Roth tsp then put rest in brokerage. More tax efficient to use the tax efficient vehicles first
Fuck dude, are you even on this plane of existence? Wish I could save even a fraction of that.
If you plan on doing the full 20 max out your TSP because the fees are lower then any managed fund outside of TSP. Go 50/50 in the “C” and “S” fund and watch your money grow.
You can also borrow up to 50% of your TSP balance while you’re in and any interest paid gets invested back into your account.
Taxes are only going to go up so the more you have in taxable accounts the bigger the tax bomb in the future. Plus all the other things people have said