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I already UTSF and saw a very posts earlier talking about variable-universal life insurance. I was wondering what people's thoughts were in general about these types of policies. I understand there are huge incentives for advisors to push these, more expensive than term insurance, should build (potentially significant) cash value, has mostly positive tax benefits, and gives the adviser/insuree ability to adjust as needed. Any additional thoughts would be appreciated. My adviser is pushing it pretty hard, and whereas it appears to be part of a comprehensive plan, I want to be sure he's pushing this for the right reasons...

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AAFMAA offers great rates and no aviation "penalty fees."

Been with them for years. $800K in coverage for about $35/month. My spouse also has a policy with them (she's not military) for the same premium and coverage.

AAFMAA is great.

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I already UTSF and saw a very posts earlier talking about variable-universal life insurance. I was wondering what people's thoughts were in general about these types of policies. I understand there are huge incentives for advisors to push these, more expensive than term insurance, should build (potentially significant) cash value, has mostly positive tax benefits, and gives the adviser/insuree ability to adjust as needed. Any additional thoughts would be appreciated. My adviser is pushing it pretty hard, and whereas it appears to be part of a comprehensive plan, I want to be sure he's pushing this for the right reasons...

If he is with First Command, you can be sure he is not pushing it for the right reasons.

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  • 4 weeks later...

Ok, so my wife & I both max out our Roth IRAs (mine from USAA, hers from Vanguard). I've also been putting away about 9% of basic pay into a traditional TSP. Been thinking about converting the TSP to a Roth. Is it smart to keep the traditional TSP since we are already putting in $11K/year with our Roths? Thoughts from the peanut gallery?

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Ok, so my wife & I both max out our Roth IRAs (mine from USAA, hers from Vanguard). I've also been putting away about 9% of basic pay into a traditional TSP. Been thinking about converting the TSP to a Roth. Is it smart to keep the traditional TSP since we are already putting in $11K/year with our Roths? Thoughts from the peanut gallery?

Not sure about TSP conversion, but if you're talking about trying to decide whether to invest in traditional vs Roth TSP then I'll bite.

Roth is purely a tax treatment of your investment. So it's not a diversification issue in terms of investments-which is kind of what I think you're asking. However, diversification of your tax basis can be a very useful thing.

You have to decide whether you think your tax rate will be higher in the future. But you already knew that.

The baseline for most of these discussions are that you have $15k to invest, if you pay tax and put it in a Roth then you invest less that $15k this year, but it's all tax free when you withdraw. If you put that $15k in a traditional tsp account then its pretax so you get all of $15k in the account now but you pay tax on all of it later.

If you and your wife are in a position to max out your Roth IRA and TSP, I would rather have $23k (I think that's the limit this year-18 in tsp and 5 in Ira?) of after tax money than $23k that I still have to pay taxes on.

Then again, the Feds could renege on the whole Roth thing altogether.

So as with most things, it depends.

Good luck.

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Slightly off topic, but Vanguard typically has the lowest costs of all of the investment firms, so consider the fees that USAA is charging you. It's a simple process to change your USAA IRA to Vanguard. I switched mine a year and a half ago and I've been very happy.

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It depends. You have to consider your current tax situation and your projected future tax situation.

For most military people, the Roth side of things is pretty nice, especially if you get CZTE and can reduce your taxable income significantly. In that case, money invested in the Roth IRA and Roth TSP (also the earnings) never get taxed.

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especially if you get CZTE and can reduce your taxable income significantly. In that case, money invested in the Roth IRA and Roth TSP (also the earnings) never get taxed.

AFAIK, Roth TSP contributions cannot come from tax-exempt money....

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AFAIK, Roth TSP contributions cannot come from tax-exempt money....

Roth TSP can come from tax exempt money but only up to the deferred contribution limit ($18k this year). If you want to put more than that into tsp (I think the limit is $53k or so) that can (actually has to) come from tax exempt money but it has to go into traditional TSP.

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Roth TSP can come from tax exempt money but only up to the deferred contribution limit ($18k this year). If you want to put more than that into tsp (I think the limit is $53k or so) that can (actually has to) come from tax exempt money but it has to go into traditional TSP.

Ah... that's the distinction I was missing. Thanks!

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  • 3 weeks later...

Did DFAS screw up anyone else's Roth TSP contributions for February? Nice of them to tell me ahead of time that they're going to take all of my Feb contribution from my end of month paycheck.

Also sweet that they emailed my CC to let him know that I won't be receiving any money at the end of the month. Now he wants me to go to A&FRC and shit to look into getting an advance for March. I told him I got more than I expected for the first half, and I'm not retarded so I'm good.

I guess more of you tards live check to check than I thought.

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The Frontline documentary really played up how "confused" people are with investing. How confusing can it be to deposit money into your IRA starting in your 20s? I mean, people will figure out whatever is important to them, but for some reason Americans don't think they need to take care of themselves anymore. Now that defined benefit pensions are a thing of the past and 401k accounts are the norm, people actually have to figure it out instead of just coasting.

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I think you overestimate basic financial education and properly-placed values among Americans. Members of my own extended family spend $300 on a hockey jersey, yet have 0 savings or investments. Comes down to values, and values are hard to change in adulthood.

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Inspired by the Frontline piece I checked the expense ratio of the TSP L2040... was 0.029% at the end of 2013 which seems great.

USAA's 2040 fund expense ratio is 0.86%/0.83%.

Vanguard's 2040 fund expense ratio is 0.18%.

Maybe I should transfer my USAA Roths into Vanguard.

(Edit to add some math: a $75,000 Roth IRA, with annual additions of $5,500 and a growth rate of 6% over 30 years will cost $150,000 in fees at an expense ratio of .86% and $34,000 at an expense ratio of .18%.)

Edited by Homestar
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Inspired by the Frontline piece I checked the expense ratio of the TSP L2040... was 0.029% at the end of 2013 which seems great.

USAA's 2040 fund expense ratio is 0.86%/0.83%.

Vanguard's 2040 fund expense ratio is 0.18%.

Maybe I should transfer my USAA Roths into Vanguard.

(Edit to add some math: a $75,000 Roth IRA, with annual additions of $5,500 and a growth rate of 6% over 30 years will cost $150,000 in fees at an expense ratio of .86% and $34,000 at an expense ratio of .18%.)

I bailed on USAA mutual funds 4 years ago and never looked back.

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Inspired by the Frontline piece I checked the expense ratio of the TSP L2040... was 0.029% at the end of 2013 which seems great.

USAA's 2040 fund expense ratio is 0.86%/0.83%.

Vanguard's 2040 fund expense ratio is 0.18%.

Maybe I should transfer my USAA Roths into Vanguard.

(Edit to add some math: a $75,000 Roth IRA, with annual additions of $5,500 and a growth rate of 6% over 30 years will cost $150,000 in fees at an expense ratio of .86% and $34,000 at an expense ratio of .18%.)

Don't use the target date fund and with that size investment you'll be in the Admiral class shares which have even lower fees. My expense ratio at Vanguard is 0.09% right now.

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