New to the game…

This topic contains 9 replies, has 4 voices, and was last updated by  NokieVA 3 years, 8 months ago.

Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
    Posts
  • #16886

    bamzone91
    Participant

    Hello community,

    I am active duty and have been so for 4 years (currently aged 24). I just joined the TSP band-wagon and very much regret wasting my money for the past 4 and a half years of services. I am writing to ask people with high experience with TSP as I am currently doing research and learning TSP and Roth TSP. I am an open book and would like to ask the question: “If you could go back in time (in my current day in age) and give yourself TSP advise what would it be?” I am brand new to investment opportunities and saving for my retirement but an severely intrigued and want to make the most of my time. I am enjoying reading and researching on this site as it have great information. I am intrigued to learn the market methodology. Looking forward to hearing from the community.

    #16896

    MrSnrub

    I would’ve taken all my money out of my TSP and invested it in Apple stock.

    #16946

    aoak

    Your goal should be to at least match the government’s 5% match in the TSP. After that goal had been reached, aim to max out your contributions to the TSP ($18000). It took me 8.5 years to get to the latter goal but I finally got there. After this goal has been achieved, open an IRA and max it out ($5500/year). Take advantage of these tax sheltered accounts. If you do not own your own home yet, and currently rent, save money for a down payment and buy a home. If you are so inclined, read up on acquiring rental properties. Check out Investfourmore.com. I would have started this at your age if I could start over…

    #16949

    ScottyD

    Aoak,

    Military doesn’t have match.

    bamzone, remember, ALL of your money made in combat zones is TAX FREE. This means, you need to put that money into a ROTH. You don’t have to pay taxes on it when you invest it and you wont have to pay taxes on it when you withdraw it. HUGE benefit.

    #16951

    Joey

    Hi Bamzone,

    First off, you should not be feeling any regret for starting your retirement nest egg at age 24. Many people in this country don’t begin that early. Rather than regret, you should feel confident that you’re doing the right thing by planning at such an early age. I spent my early twenties in school and didn’t begin making money until age 26. So you’re already ahead of me.

    As is mentioned above, the military sadly will not match any percentage of your contributions. There are significant benefits you can take advantage of, however. For example, being forward deployed to a combat zone allows the tax benefits described above, plus you can contribute more than the $17,500 cap. In fact, this limit exceeds $50,000 for any tax year you were deployed in such a setting. I was able to take advantage of this when I was in Afghanistan. If you are in a position to take advantage of this, you could theoretically enhance your retirement nest egg by over 3 years. If you know anything about compounding, this will lead to hundreds of thousands of dollars more if executed early in your building phase.

    Before considering specific TSP advice, it is helpful to establish more general principles. Developing good habits and sticking to them (e.g. budgeting and allocating x% per month to savings goals) is key. Maxing out Roth plans (IRA and TSP) should be cornerstones to your strategy while you are young and in a low tax bracket. Finally, get an idea of your own personal risk tolerance. Knowing yourself and how much risk your comfortable with, will help you make confident decisions.

    Once you’ve developed these foundational principles, then you can delve into specific allocation strategy. I tend to agree in large part with the strategies discussed by TS Paul here, which is essentially a buy-and-hold in that it ignores short term market sector fluctuations and volatility, favoring more broad and well established economic cycle patterns.

    As you explore this world of retirement planning and investing, always keep in mind the target you’re aiming for. Knowing what you want to do in retirement, and projecting how much income it will take to achieve that, will go along way to helping your develop your own strategy.

    Good Luck!

    #16957

    TS Paul
    Keymaster

    The two most important bullet points I always give to folks when they are starting out:

    (1) time in the market beats everything: You are in great shape here, starting at 24 you have a long, long investing horizon. As cool as it was two years ago when I got 38.5% return in my Thrift Savings Plan, that pales in comparison to what the 7.8% I got last year will turn into when compounded over the next few decades.

    (2) always seek out tax advantaged vehicles for your investments: TSP and IRAs are like starting with a 20-30% (or more) return on your investment on day one.

    After that, the next most important rule is not to think you are smarter than you are. Over the long term the vast majority of people will not do well trading options, buying penny stocks, playing with commodities futures, doing foreign currency exchange trades, and the like. The institutions win those games. Let the market do the work for you and put most of your money in big boring index funds. Anything else is just your Vegas money.

    The TSP Allocation Guide www.TSPallocation.com

    #17187

    bamzone91
    Participant

    Hey guys sorry to resurrect a two month old thread but i figured i would give you guys an update. I finally have my TSP and am able to allocate. I have been doing a lot of research and looking at the posts. I have a couple questions…

    So i am fresh and haven’t allocated a lot since my first contributions went into the G fund. I know you guys cannot give individual advise but i would rather have your “opinions” on if you were starting fresh. If you were in my shoes would you guys jump into the bandwagon of 85% S and 15% I or would you rather build a base into the other funds as oppose to start this way? Either way after reading Mr.Paul’s post after the Aug drop he made very valid points about keeping his allocations. I am just debating on if this is the smartest idea or should i start building into more of a 45% C / 55% S or even spread it more. Looking from annual returns S does seem to be doing well at points. Just trying to maximize my money growth and hopefully have some “vegas money” :o)

    Also, I have having trouble understanding what it means to max TSP.. does that mean to max the possible contributions per year?

    Hope my questions are valid and looking forward to hearing back.

    #17193

    aoak

    Bamzone91,

    Go with 100% S fund and don’t think about it again until the economic conditions call for a change in allocation. If you want to do the 85% S 15% I, that is your call, but personally I am just in the S-Fund. TSPAUL gave his reasoning for his 85% – 15% allocation and so at least you have something to base your decision on. The biggest thing you need to take to heart is the notion of “set it and forget it.” I started when I was 22 and have $100k built up already at age 30 but I did not move in and out of TSPfunds. I was all in the L2040 until I came upon this website and TSPAUL teachings. I realized that the L-FUNDS underperform the individual funds quite a bit. Who knows how much I would have in my retirement if I had just been in the right, individual fund for the past 8 years. As long as you abide by the general market indicators that TSPAUL teaches. ..you are golden 🙂

    #17655

    Anne

    Go with stock. I was hesitant in the beginning and cautious when I did move into stock with a 50/50 split between G & stock. Although the G fund was up at 6-9% annually, the cumulative C fund return was more than double the G fund over 9 years. I would have a lot more money today in TSP if I had gone with stock to begin with.

    If you put all your funds in S on the day you posted-29 Sept 2015, as of last Friday your earnings between G & S would have been as follows:
    G Fund $0.0189/share (0.1272%)
    S Fund $0.1235/share (0.3422%)
    You want to buy when stock when it is not doing well and you expect for it go up. Both the S & I have more of an upside in my opinion than the C fund currently. The market has been a little crazy this past year and will always have its ups & downs. If you follow the business cycle as TS Paul advises, you will do better than most. I wish I would have found this site early last year. Good Luck

    #17671

    NokieVA
    Participant

    I know I’m posting to an older thread, but my $0.02 –> invest in an aggressive strategy when you’re young and leave it alone if you don’t want to worry. It will gain nicely over time. Maximize your contributions best you can .. and let it roll.

    If you want better returns and are willing to invest time and energy into, move to a monthly allocations strategy and get solid advice on where it should be. This strategy isn’t necessarily more risky with good allocation advice. But you’ve got to be more active in managing it.

    Cheers,
    Jeff

    www.TSPinvestor.com

Viewing 10 posts - 1 through 10 (of 10 total)

You must be logged in to reply to this topic.