Investment showdown -- beyond the Roth, SDP, & TSP

[Fud]

Emergency fund is a sound part of any investment strategy. It keeps you from pulling from "pure" investments (IRA, 401, TSP, etc...)

Optional stash locations: weekly rolling CD's, money markets, and mutual funds. The point is to personally insure your own finances, but that doesn't mean you can't put that money to work while it's waiting for the emergency. Just keep it accessible - near liquid. The emergency fund is a step one in my book. It's the base of the pyramid and is the insurance foundation for all the other good things.

The best thing to do is never pull from your Roth for any reason. Unemployment or an extreme emergency would be the only case where you should do this.

The ROTH IRA can also double as an emergency fund, since for ever $1 you put in you can take out at anytime with no penalty. It is only the interest accrued that you cannot withdraw until retirement. Not a good habit to get into, but it is better than having an emergency fund that accrues dismal interest rates in a savings account.

I don't recommend this strategy either, and I understand you're not advocating for it. The emergency fund we use, again not for everyone, is a money market account. It is not there for intereste accrual, but for big, unintended expenses we incur. The other factor is that this fund is completely liquid, and can be accessed immediately.

[BB Stacker]

Except "quality funds" are not the reason to go Roth before TSP for retirement savings. The differences are in the way they are taxed.

As a 2Lt making no money (therefore paying a low tax rate), max Roth first. Pay taxes on the money while you are in the 15% bracket because odds are you will be in a higher bracket in retirement. After you've done that, put as much as you can in TSP.

I was talking about comparing Roth IRA to Roth TSP, but yeah, if we're talking Roth IRA vs 401(k) style traditional TSP there's no question which is a better choice as a junior officer making not so much money.

[Ziplip]

Was looking at opening an IRA and saw some of you mention going with Vanguard instead of USAA, any reasons why Vanguard is the better choice?

[nsplayr]

Where are you getting 6% back at the grocery store? are you paying a fee for your card?

This. I don't actually have the card but am thinking about it considering how much we spend on groceries. $75 annual fee but I'd make back way more than that getting 6% on groceries, let alone 3% on gas + 1% on everything else.

[matmacwc]

The CC companies are counting on the day you don't pay, Dave Ramsey has the statistics, most don't. Gamble at your own risk.

[OregonHerc]

This. I don't actually have the card but am thinking about it considering how much we spend on groceries. $75 annual fee but I'd make back way more than that getting 6% on groceries, let alone 3% on gas + 1% on everything else.

Highly recommended card, as far as I'm concerned. The wife and I get approximately $350-400 cash back per year (so around $275-$325 after annual fee). Good customer service too.

[Swizzle]

Anyone have good numbers analysis or spreadsheet on rental house(s)? rental house taxes-on-profits breakdown or the like?

[MacGyver]

just FYI on the AMEX Blue Cash card...Target and Walmart don't count as grocery stores, even if you buy only groceries there.

Still a great card and I beat Dave Ramsey's statistics and pay it off every time.

[Archa3opt3ryx]

This. I don't actually have the card but am thinking about it considering how much we spend on groceries. $75 annual fee but I'd make back way more than that getting 6% on groceries, let alone 3% on gas + 1% on everything else.

Freakin' awesome card. Much better website too than the one for my Chase Visa. With all the road tripping and PCSing I did this summer, I made bank on the 3% gas rebate.

To everyone saying "max out your Roth before your TSP"....I'm kinda confused about this. In about a week or so, your TSP can become a Roth, right? Are you advising having a non TSP Roth account, or what?

[Danny Noonin]

We're saying don't put retirement money into a regular TSP/IRA/401K style plan until you've maxed out your Roth IRA and now Roth TSP...either Roth option has the same tax advantage over traditional plans for someone in your shoes.

As for "non-TSP" Roth account (i.e. Roth IRA), that's up to you. TSP gives you limited options, but low cost. Roth IRAs have tons options (mutual funds, etc), some of which are low cost, some less so. TSP is easiest to set up and you can contribute up to $17K, but it's also easy to open an account at Vanguard, TRowe Price, USAA, etc and you can systematically contribute up to the $5K Roth IRA limit.

Edited September 12, 2012 by Danny Noonin

[BFM this]

There are better commercial vehicles than TSP; Vanguard and T Rowe Price are two that come to mind. Point is, you should run, not walk, as fast as you can, every year, to max out your Roth savings. All $22k if possible.

[Archa3opt3ryx]

We're saying don't put retirement money into a regular TSP/IRA/401K style plan until you've maxed out your Roth IRA and now Roth TSP...either Roth option has the same tax advantage over traditional plans for someone in your shoes.

As for "non-TSP" Roth account (i.e. Roth IRA), that's up to you. TSP gives you limited options, but low cost. Roth IRAs have tons options (mutual funds, etc), some of which are low cost, some less so. TSP is easiest to set up and you can contribute up to $17K, but it's also easy to open an account at Vanguard, TRowe Price, USAA, etc and you can systematically contribute up to the $5K Roth IRA limit.

Gotcha, thanks.

There are better commercial vehicles than TSP; Vanguard and T Rowe Price are two that come to mind. Point is, you should run, not walk, as fast as you can, every year, to max out your Roth savings. All $22k if possible.

You mean in terms of ROI? Your IRA (and TSP) are basically just mutual funds, right? So you're saying Vanguard and T Rowe Price (what about USAA?) have better funds than TSP?

[Danny Noonin]

Your IRA (and TSP) are basically just mutual funds, right? So you're saying Vanguard and T Rowe Price (what about USAA?) have better funds than TSP?

Dude, this is ridiculous. You have to learn to google.

IRAs/Roth IRAs can be in mutual funds but don't have to be. It's simply a type of account. TSP has a variety of mutual fund-ish options. Read their website. Other companies (Vanguard/TRowe/USAA/Fidelity/etc) offer a variety of funds depending on what you are looking for. Stock funds, bond funds, large cap, small cap, international, lifecycle funds...Go to the libarary or bookstore and get a "investing for dummies" book or something basic along those lines to learn more. Read about asset allocation, fees, dollar cost averaging, risk/reward.

Here is your final--and most important--lesson in personal finance for today...never take financial advice from a pilot or from someone on the internet. In this case, you are trying for both.

[Archa3opt3ryx]

Dude, this is ridiculous. You have to learn to google.

IRAs/Roth IRAs can be in mutual funds but don't have to be. It's simply a type of account. TSP has a variety of mutual fund-ish options. Read their website. Other companies (Vanguard/TRowe/USAA/Fidelity/etc) offer a variety of funds depending on what you are looking for. Stock funds, bond funds, large cap, small cap, international, lifecycle funds...Go to the libarary or bookstore and get a "investing for dummies" book or something basic along those lines to learn more. Read about asset allocation, fees, dollar cost averaging, risk/reward.

Here is your final--and most important--lesson in personal finance for today...never take financial advice from a pilot or from someone on the internet. In this case, you are trying for both.

Sorry, that was crappily worded. Fully aware there's lots of options for IRAs (funds, bonds, even stocks if you want, etc), though I assume most people use some sort of mutual fund-ish option like you said. Just wondering what specifically Vanguard and the others offer that you consider to be better to TSP.

Edited September 12, 2012 by LoneWolf121188

[Danny Noonin]

Just wondering what specifically Vanguard and the others offer that you consider to be better to TSP.

Variety, options, performance (sometimes). Lots of things.

This is your money dude. Don't be helpless. Dive in and figure it out. I'm serious, go to the bookstore and get one of the "dummies" books to start yourself out.

Edited September 12, 2012 by Danny Noonin

[Archa3opt3ryx]

Will do, thanks. Plenty of time to kill on casual...

[wings]

Talking investments is like talking politics or religion. No one agrees and thinks their way is the best. I've seen dudes do the Ramsey deal and it worked for them (although it turned them into cheep asses that didn't pay for shit and refused credit card roulette and combat splits on TDYs). I think everyone needs to find what works for them. Personally I live for today but save for tomorrow. I realize that I'm probably close to my pinnacle of pay, and choose to enjoy it. I feel I'm smart with my money and still tuck about 35% away. Seriously you have to live. Spend that shit, buy something nice, enjoy it! Life is short...

[Guest]

I've seen dudes do the Ramsey deal and it worked for them (although it turned them into cheep asses that didn't pay for shit and refused credit card roulette and combat splits on TDYs).

Foul.

[DC]

We rounded the corner from mostly debt repayment to mostly investments and the finances have become quite a bit harder to track... What software are y'all using to keep track of it all? (I'm a mac user, but feel free to answer for PC as well)

[OregonHerc]

We rounded the corner from mostly debt repayment to mostly investments and the finances have become quite a bit harder to track... What software are y'all using to keep track of it all? (I'm a mac user, but feel free to answer for PC as well)

Mine aren't nearly as complicated, probably, but I use Mint.com (and its associated app on the iPhone/iMac). It's got a simple interface, but it works rather well.

[DC]

We used Mint.com quite a bit when we were first getting our finances under control. We've moved on, though... we want something that can help us forecast our future taking both investment and debts into account....as well as keep up on track on a daily basis with our budget.

[BigE]

Moneydance -- good across all platforms. Particularly good if you deal in foreign currencies.

I liked quicken better for tracking basic investments when I was using a PC - but do NOT recommend that for a Mac.

Moneydance was the best Mac compatible product I cood find when doing research a couple yrs ago on financial software.

[17D_guy]

...TSP is easiest to set up and you can contribute up to $17K...

Wait.. what? I've got 15% monthly kicking over into that thing, and maxing out my IRA this year. For the first time ever actually, kinda proud.

NM - 15% is just over 1/2 the allowed limit. For those not interested in google - https://www.tsp.gov/planparticipation/eligibility/contributionLimits.shtml

[Guest]

... we want something that can help us forecast our future

Not sure anyone's figured out how to do that yet...

[Bishop]

Not sure anyone's figured out how to do that yet...

What he said. If you are very anal about your finances, Id recommend GNUcash, works good across platforms, and I used it when I was in my linux kick. I just use USAA's money tools to track "where I spend" for the most part. once every few months ill look at my purchase history and think of items anywhere I overspent and make adjustments if necessary. What works for me is pre-routing my paycheck into separate accounts. I have fixed dollar amounts going into my checking, and joint accounts, whatever is left over goes into my savings account that I use to feed into investments and/or emergency funds. All bills are paid from the joint, and the checking account is my own money to spend as I want.