What exactly is the TSP, if someone could provide a brake down, that would be awesome. Also, where can I go to read about the TSP and investment plans? If anyone could point me in the right direction, that would be great.
Second part, not that I am asking for financial advice. I'm just curious as to what will be recommended. I am 20, and will have about 12k saved by end of August, and hope to be enlisting shortly after. How can I start now with the whole investment plan thing?
I'm starting to research on my own, but would like to hear from some more informed folks as well. I would ask the family, but they don't have a thing like this.
Thank you for your time, I appreciate the help.
Question about the TSP, and Investment plans as a whole.
byu/IndependenceNo9512 inMilitaryFinance
Posted by IndependenceNo9512
3 Comments
The Thrift Savings Plan is the government version of a 401k for retirement for military and government employees. If you want to see the funds and learn about the tap, visit the site: tsp.gov
It will have everything there about the funds, returns, etc.
not sure what else you are wanting to know about. You’ll have the option to put your money in either traditional or Roth, so that may be something to consider now.
Once you enlist and start contributing to your tsp, at least do 5% of your base pay so you will receive the full match from the government! Free money into your account.
As far as the rest of the question, if you are comfortable with it you can also open an IRA and contribute up to 7k for this year (assuming you have earned income). In that case, again determine if you want a traditional or Roth. And I’d recommend opening it at a large known firm like vanguard or fidelity. From there, I’d recommend a mutual fund if you are new to inventing. Something like VTSAX will basically mimic what you see in the overall “stock market” and follows the Dow.
Best of luck!
I applaud you for taking steps to set yourself up for success, but don’t claim you are researching for yourself when you are asking others to answer questions that the TSP website answers entirely.
https://www.tsp.gov/about-the-thrift-savings-plan-tsp/
I recommend reading about the TSP on the site. If you are unsure of something or want more info then this is a great place to ask, but you need to do a little work yourself because these are already answered in depth here and on the TSP website.
The TSP is an employer sponsored (in this case, the US government) retirement plan. There is a limit to how much you can put in (~23K/yr at this point), when you can start to take money out (when you turn 59.5 years old with some exceptions), the government will match some of your contribution (up to 5%), and the fees are low. You can choose a traditional account (your contribution reduces your taxed income NOW but you pay taxes on what you take out later) or Roth account (you pay taxes on the contribution now but can withdraw all the money tax free after 60).
If nothing else, put in enough to get the full government match as that basically a 100% return on investment, though I think you need to serve for 18 months before you can get the match. With as little as you will make right now, the Roth is probably the best option as you don’t pay much in taxes anyway and will almost assuredly have a higher income/tax bracket when you retire. Pick the account closest to the year you turn 65 (so L2065 if you are in your early 20s now) and it will automatically pick higher risk/rewards stocks now and transition them to more conservative stuff as you age, ensuring a stock market crash doesn’t wipe you out right before you were going to need it. Or you can move around between the other options as you see fit.