July 14, 2014 at 8:57 am #12974
Some of us live under bridges, others in the sewer, or the creepy part of the woods…maybe in a cave! We do not appreciate such stereotypical terms as “Troll”, but something with more flexibility like “Ground Dweller”.
My bubble was burst, I got all butt hurt because my thinking was wrong…partially. The best return has nothing to do with shares, but the balance of that fund does. I don’t know how exactly the price per share is determined, but as the return goes up I would think the price goes up as well. As the price raises it in turn increases your balance, which is also increased by the # of shares. Number of shares x price = balance. The only static variable you have some control over is the # of shares that can drive up the balance.
Something that bugs me is the “Take 5 for your future” is the really the best choice for everybody? If you put all your money in Roth or Traditional I would say maxing out however much you can afford is your best option; if you set it and wanna forget it do at least 5%. What if you’re like me and can’t commit to one type and spread your money in both Traditional and Roth? By default it only matches your traditional and doesn’t care about Roth (unless this has changed at some point, or is only a display issue). You only need 4% the majority of the year, and only change to 5% on months with 3 electronic paydays.
NOTE: I have only have seen this one time, this is why I say to adjust for the entire month, but on my one case it was the middle pay date of the month that matched the entire 5%. To play it safe adjust for the entire month.
This could be a GUI error where they are only matching .5% of that fourth percentage point, OR they are convincing people to take 5 for your future for an extra .24 extra cents per year on non 3 pay months.
Has anyone else seen anything along these lines? This is my take on what I’m doing.
Why do I separate into both Roth and Traditional though? Well…we can go into my commitment issues if you want ;), but each way has its pros and cons.
1) Tax rate may be lowered because you have moved to a lower tax bracket or as our population increases perhaps we pay less taxes?
2) You can also believe that I’m going to pay a higher tax rate later, I mean you have been saving for 20+ years and your money has grown quite a bit. You put it in a roth TSP you shouldn’t have to pay taxes on it, but what if taxes are now lower and you feel it was the wrong move putting money in the Roth TSP.
3) What DanDan considers (Third person, look out), no matter if you move into a higher or lower tax bracket, having some Money tax free while you pay taxes on the traditional would be a good idea for me because I don’t have a crystal ball. If everyone did Roth and paid taxes now something would be done to collect more taxes later in life. Let me put on my aluminum hat now…..if everybody did Roth in the US, how would they get more income for government funding besides taxes on items? This would cause double taxation on your investments, but it’s ok because they will double tax everybody so it’s fair….right? Then the mind control begins through your fillings in your teeth! 😉
A word of caution before you do this, you could be missing money for that time period, it is only for 1 pay period in late July and hopefully this will reveal the truth or have the GUI error fixed on the site.
My suggestion IF you split your money in Traditional and Roth like me, before the next pay day before July 18th move your Traditional allotment to 4%. In my case it matches everything but .01 cent. Then before Aug you change back to 5% then the month of August you leave it and see what I was talking about. In my case, on the 2nd payday it matched the whole 5%, the other two times it did not.
https://www.nfc.usda.gov/epps/index.aspx = adjust your tsp account
After August you can move it back to how you desire. My idea is the traditional you put just enough to get the match, while the rest you put in the Roth. You may say this is silly and I should put all my money in one or the other based on my belief of what is going to happen in the future. Guess I’m kind of a cautious investor, I don’t go with the “go big or go home” approach.
However, I do believe in the strategy of Business Cycle investing and think that Paul is on top of his game! I’m curious how his new endeavor will go for IRA and 401k investing website. I wonder why Vanguard is the best decision? I’m assuming it maybe because they charge a lower fee rate than other online investing. Sleuthing online a bit it is better for a lower rate, but charges $10 per trade? hhmmm….the first 25 trades are 7 dollars, but after that it’s 20 bucks per trade (this is for accounts under 50,000), is this right? So if you are with Vanguard stay with an index fund and do minimal trades….or have 500k+ in the account for $2 trades? I dunno why some organizations go through Fidelity then….maybe there can be a written piece on this as well at some point.July 18, 2014 at 12:24 am #12990
As always DanDan, it is an adventure following your journey through personal finance. 😉
I will pick and choose a few threads to reply to:
– I think you are a little off when you say that they only match your traditional. From the TSP.gov website:
our Agency Matching Contributions are based on the total amount of money (traditional and Roth) that you contribute each pay period. All agency contributions are deposited into your traditional balance.
– why do I like Vanguard? Typically in the past they had the lowest fees and expenses. In the last year or so some of the other big fund companies have come down considerably to try to compete. With a Vanguard brokerage account, no commissions are charged for trades involving Vanguard ETFs (which are really all you need).
– I don’t think there is any downside to investing in both traditional and Roth TSPs if that is what you want to do.
Thanks for playing, -ts
The TSP Allocation Guide www.TSPallocation.com
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