Going through IBOLC as a 2LT, and with pay coming in, I’m seeking financial advice.
My current situation is: I have no debt,
majority of my $ is in my individual brokerage account through Charles Schwab (all of the money is in SWVXX, just to grow safely and steadily).
I also have a Roth IRA opened, just threw a grand into it back in March (doing SWSTX for my Roth).
Then just a few thousand in a checking account to use to do autopay on credit cards and for my debit card if I ever use it.
My question is- is there something I should be doing differently to optimize my $, especially as I’m getting an active duty 2LT income now? I will definitely start up the TSP shortly here too (even though the 5% match doesn’t happen until 2 years of service).
Should I disregard my individual brokerage account in SWVXX and focus more on maxing out the Roth/TSP? Should I put all of my investments into just the TSP, or just the Roth, or split between the two? Looking for guidance- thanks.
Posted by Bulker3000
3 Comments
Follow the finance flow chart in the wiki for this sub. SWVXX is not going to give you the growth or tax sheltering you need, but can potentially be an emergency fund. Most of us though use an HYSA though for FDIC insurance.
ROTH TSP and IRA should be your properties at this age for the long run in the main C fund (TSP) and index funds following something like the S&P and/or Nasdaq (VOO/QQQ). Keep it simple.
Build up an emergency fund, 3-6 months of cash and max your Roth IRA as a 2LT. SWSTX is a good total US fund, figure out if you want international diversification and add some in, if not, stick with 100% SWSTX, don’t chase individual stocks and ignore headlines. After that, I would personally work towards contributing as much as you can into your Roth TSP. Don’t live in poverty to do it, so enjoy your life and bump up your TSP contributions when you get raises. I was able to max mine around year 4, admittedly without family to support which another major consideration. After those are maxed, put extra cash into your brokerage and maybe savings for a down payment for a house if you’re so inclined. In the meantime I would put your brokerage funds into SWTSX or whatever mix you use in your Roth IRA.
https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2
For me personally, with no state income tax and expecting a pension that will put me in the same marginal tax bracket, I decided Roth is the TSP classification for me, at least for now.
I would max the Roth IRA, then work towards TSP. Maybe save some in that Schwab for non-retirement expenses in 5-10 years. The tricky decision between focusing on TSP or sending some to SWVXX is that (1) You can’t “make-up” missed room in your 401k limit and (2) if you do put in the 401k, you can’t use it in short term (typically).
You could split it up though:
6k to max Roth IRA
Of the remaining, 3/4 to TSP, 1/4 to Brokerage account.
The important thing is you’re already thinking about it.
If you haven’t read the r/personalfinance wiki, I would. It’s got by-age recommendations (I would read them all). if you’re interested in retiring early, check out r/financialindependence. There’s a lot there, and some can be a bit extreme in their pursuit, but the core idea is good as long as you aren’t miserly about it.