Thrift Savings Plan

[Phantom Warrior]

I'm a fairly recent member of the U.S. Army.  I'm seriously looking at how to invest my income right now.  One of my big priorities is to put away money for law school in five years or so.  But I'd also like to think about retirement.

What is the Thrift Savings Plan, exactly?  As I understand it, it's a government sponsored fund where you invest in bonds (?) and they match the first few percent of your contributions (?).  And this is NOT a normal saving account where I can withdraw the money whenever I want?  I need to keep it there until retirement?  What if I get out of the Army in 4-6 years?  Which I probably will (though I may join the Guard).  What do I do with the money then?

Any responses will be appreciated.

[Paddy]

I'm not familiar with it, but it has it's own website http://www.tsp.gov/

[K Frame]

Thrift savings is a retirement vehicle. It is not a short-term investment vehicle.

Money you put into the TSP is tax deferred until you retire. If you withdraw it before then, the penalties can be quite severe.

Look at other options through a military-sponsored credit union, such as Pentagon Federal.

[Phantom Warrior]

Can you roll TSP into an IRA or some other "retirement vehicle" until retirement age when you leave the Army?  You can usually do that w/ 401(k) plans...

[Kharn]

You pick which "fund" you want to invest in, it can be government bonds, S&P500-tracking fund, international stock market funds, etc.  The government matches the first 5% for civilian employees, I would assume its the same for active duty.

Here's more info, specifically for active-duty troops: http://www.tsp.gov/uniserv/features/index.html

Check the TSP website, or talk to your NCO (or CO if you're an officer) if the website cant answer your questions. He/she will point you to the right office on your facility.

[K Frame]

That I have no clue about, Warrior.

[Jamisjockey]

Thrift savings is a retirement vehicle. It is not a short-term investment vehicle.

Money you put into the TSP is tax deferred until you retire. If you withdraw it before then, the penalties can be quite severe.

Look at other options through a military-sponsored credit union, such as Pentagon Federal.

IIRC, you actually cannot draw TSP until age 59 1/2.
Since they match either 5 or 6 %, put that amount in.  That should be a no brainer, as its a 100% return on your money, plus whatever you actually make on that.
I suggest the L fund, select the timeframe you'll draw the money out.  

For your college fund, you should probably put something into a short term investment, such as a Mutual Fund.  

By doing both, you're diversifing, too.

As far as if you can still invest into the TSP after you leave .gov service, I doubt it but I don't know.  Even if you only invest while you are in, and the sit on it until 59 1/2...its a freaking good deal.  If that's your case, then when you hit the working world, invest in a Roth IRA, and maybe some more mutual funds.

You really oughta invest in the TSP.  I'm up to $49,470 in mine and have been in it for a few years.  I've borrowed against it (bad idea, don't do it) twice when necessary.  Still have about $4,000 outstanding that I'm paying back into it.

[Firethorn]

Sorry, Kharn, you're incorrect.

The air force at least doesn't match anything, at least yet.  The services do have the option of matching funds, but I'm not aware of any doing it.  I'm currently contributing 5% and get no match.  I'm concentrating more on Roth IRA's, as I usually get the tax credit, giving me back $100-200.  The credit(means you get back amount) is dependant upon income, but if you're junior enlisted you definitly qualify for it.

Contributions made in a tax free status is tax free period, while normal contributions are tax differed.

There are five funds, and they just added a sort of sixth this year.  They're listed in descending order for stability, and roughly ascending in order of potential returns

G: Government Securities Investment Fund: Federal savings bonds.  Average lowest returns, but very very stable
F:  Fixed Income:  Bond index fund
C: Common Stock: S&P 500 index fund
S:  Small Cap: index fund that tracks Dow Jones Wilshire 4500 Completion
I:  International Stock Index fund

L:  Life cycle funds.  You tell it when you anticipate retirement and it automatically puts you into a fund that invests between the other 5, balancing potential gains and risk, concentrating on growth early on, tending towards maximum stability as you reach retirement age.

There are a couple ways to get the money out, for education as an example, but you have to be careful.  Ask your local financial advisor for more details.  You can also take out a load against the money invested for a first home.

You can also hit up www.tsp.gov for more information.

[K Frame]

Unless I'm mistaken, you can withdraw from the TSP prior to 59 1/2, but only under certain circumstances, and the penalties can have a severe negative effect on the ability to accumulate future earnings.

[Jamisjockey]

Unless I'm mistaken, you can withdraw from the TSP prior to 59 1/2, but only under certain circumstances, and the penalties can have a severe negative effect on the ability to accumulate future earnings.

True.  59 1/2 is when its yours.

The air force at least doesn't match anything, at least yet.  The services do have the option of matching funds, but I'm not aware of any doing it.

Man, that's a screw job.  Hopefully the low recruitment numbers these days will get our gubmnt and the services rethinking pay and compensation.

[Phantom Warrior]

Alright, after reading through TSPs website I've pretty much concluded the following:

1.  You can roll TSP over into a qualified IRA or retirement plan.  That's an attractive option.
2.  No, there is no contribution matching for military personnel at this time.  Lame.
3.  Historical returns for some of the for agressive funds have averaged around 10%.  Of course, some years it loses 20%, but then gains 40% the next year.  That's the market.

TSP seems sort of attractive, esp say the S fund, and it would be a good way to diversify my investments.  I can only contribute...10% of my pay (a couple $1000 a year), so I would have to invest the rest of the money elsewhere.

Anyone been involved w/ TSP?  Is it worth looking into?

[Jamisjockey]

Alright, after reading through TSPs website I've pretty much concluded the following:

1.  You can roll TSP over into a qualified IRA or retirement plan.  That's an attractive option.
2.  No, there is no contribution matching for military personnel at this time.  Lame.
3.  Historical returns for some of the for agressive funds have averaged around 10%.  Of course, some years it loses 20%, but then gains 40% the next year.  That's the market.

TSP seems sort of attractive, esp say the S fund, and it would be a good way to diversify my investments.  I can only contribute...10% of my pay (a couple $1000 a year), so I would have to invest the rest of the money elsewhere.

Anyone been involved w/ TSP?  Is it worth looking into?

Um, yea...I've got over $47,000 in it with about $4,000 in an outstanding loan.  
I strongly suggest the L fund.  I've made about $10,000 since I enrolled....I was flat for about 4 months and have lost money on two occassions doing it on my own.  

No need to max it out, but put what makes sense to you in it and diversify some more of your income into something else.

[Firethorn]

Anyone been involved w/ TSP?  Is it worth looking into?

Yes and Yes, though I recommend maxing out a Roth IRA first.

I invest in almost a 'fire and forget' fashion.  I generally check up on my retirement investments only once a year.

Of course I started my investments just before 9/11 and Enron/Worldcomm stuff, so I lost money for a while, but I've gained it back and then some.

The idea is to invest and keep investing.

[Ben]

I definitely like it. As a civilian, for me obviously  the .gov matching (100% first 3%, 50% for the other 2% of the 5% total) is the biggest draw as it's basically "free" money thrown into that first 5%.

I'm betting that at some point the military will get matching as well. I think you guys have only had TSP for like 3 years. It was stupid they didn't give you the match option initially, but at some point somebody will see you're getting ripped.

This is definitely a long term investment strategy, so my recommendation if you get into it is to diversify between funds. Put a little in one of the aggressive funds, a little in a moderate fund, and a little in the F fund. Well that's how I do it anyways.

[K Frame]

One of the great things about being young when investing for the LONG haul is that you can really afford to be agressive as all hell.

I'm turning 41 in a couple of months, and only now am I starting to move money into more conservative earnings vehicles.

[Phantom Warrior]

One of the great things about being young when investing for the LONG haul is that you can really afford to be agressive as all hell.

I'm turning 41 in a couple of months, and only now am I starting to move money into more conservative earnings vehicles.

Obviously.  I'm really just questioning the merits of TSP vs. some other investment vehicle.  Especially over a potentially short term of service.  Any money not going into TSP is going to go into a mutual fund of some sort.

[Jamisjockey]

One of the great things about being young when investing for the LONG haul is that you can really afford to be agressive as all hell.

I'm turning 41 in a couple of months, and only now am I starting to move money into more conservative earnings vehicles.

Obviously.  I'm really just questioning the merits of TSP vs. some other investment vehicle.  Especially over a potentially short term of service.  Any money not going into TSP is going to go into a mutual fund of some sort.

The simple answer:
Its a bad short term investment.  Its a great long term investment, especially if they ever start matching funds.
Short term money probably oughta go into a good mutual fund.

[French G.]

I say just do it. It is not the end all be all of investing, mainly because the services don't match funds. Its advantages are it comes out of your paycheck pre-tax, so it reduces your tax load. Tax deferred until you draw from it, and you can roll it to an IRA, 401K, or civilian gov't fund. Biggest thing for me is it is automatic. Pay yourself first, you will not miss it. I don't plan on retiring from the military, so I am making TSP work, along with working another job, stocks and Roth IRAs I hope to retire young enough to enjoy it.  I have managed to squirrel away about 4,000 a year in TSP so far and it just keeps building. Give it a try, pretend it doesn't exist and save independently of it too and you will get rich. Short term of service, it doesn't matter. Try to max out your contributions the last year, get out and then let it sit in TSP for about 35 years.  More unsolicited advice? Buy the car that makes a funny noise or two and your friends laugh at. Pay no more than 1-2000 in cash. Chances are you will have 500 more a month than them since they will be paying at least that much in payments and insurance. Young servicemen are not good insurance risks. I think the key to wealth in this country is no damn car payments.

[Jamisjockey]

French:
I knew there was a reason I liked you

I'm a firm believer that you really don't need a car when you're young and in the service, but if you want one, a little used pickup is the way to go.  Like you said, you can get one for between $1k and $2k that runs fine.  Most bases have diy shops where you can service your own vehicle.  Depending on the size of the base, you can't go wrong by having a decent bike for getting around.  Throw a rack and bag on it and you can run errands, too.  And, it adds to your PT regimen.
Car payments are evil, my wife got screwed on a trade in and intrest rate on her SUV and is paying about $150 more a month then she should have on that.  On a 5 year note, that's $9, or enough to pay cash for my Hyundai.
Paying yourself first is key to saving.  You don't need to be rich, but having enough money to enjoy life after retirement means you won't be greeting at Wal-Mart or eating dog food.

[Phantom Warrior]

The simple answer:
Its a bad short term investment.  Its a great long term investment, especially if they ever start matching funds.
Short term money probably oughta go into a good mutual fund.

That's kind of what I'm thinking.  On the other hand, I might stay in as a Reservist or Guardsman, in which case TSP becomes a lot more attractive.  Hmmm....

Buy the car that makes a funny noise or two and your friends laugh at. Pay no more than 1-2000 in cash. Chances are you will have 500 more a month than them since they will be paying at least that much in payments and insurance. Young servicemen are not good insurance risks. I think the key to wealth in this country is no damn car payments.

Yes, yes, YES.  I bought my first car (an '88 Toyota Camry) for $1300 and got almost five good years out of it.  The only reason I sold it was because I joined the Army and I'm in Germany now.  When I do decide to get a car again it will be something similar.  I doubt I'll ever spend more than $5,000 on a car, unless I become so wealthy I just have money to burn (unlikely).  I had to make payments on a credit card for a few years and that really turned me off to making payments on anything.