Author Topic: roth tsp or VanguardFINX fund  (Read 4158 times)

UltraRunning

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roth tsp or VanguardFINX fund
« on: July 31, 2013, 05:20:07 PM »
I currently have $1200 a month (75 percent of my income trying to follow MMM's advice)  to invest in each month.  Right now im currently putting $400 into my Roth TSP and $800 towards my Vanguard fund.  I am  currently 20 and wondering if this is the best method of investing my money between the two accounts. Should I invest heavier into the Roth TSp?  Or should I Dump almost all of my money into my Vanguard Fund? I know as I grow older and make rank ( currently in the military) that my pay will go up but looking for  a percentage  that would be best  if how im currently splitting it 66% vanguard 33% roth tsp  is up to snuff or if it would be wiser to shift these numbers around? Again appreciate all the responses from much more experienced investors. 

matchewed

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Re: roth tsp or VanguardFINX fund
« Reply #1 on: July 31, 2013, 05:26:20 PM »
If you're in the military check out Nord's blog - http://the-military-guide.com/ there might be something in there for you.

GreenGuava

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Re: roth tsp or VanguardFINX fund
« Reply #2 on: July 31, 2013, 05:37:54 PM »
From your title, I gather you're using VFINX - Vanguard's S&P 500 index fund.  Is that correct?

Is it in a taxable account or is it in an IRA of some sort (Roth or traditional)?

What's your goal with the money that's going into VFINX?  Is it towards a house, a car (might be inappropriate for the latter), retirement, or something else?

If it's towards retirement, I'd go heavier into the TSP - especially if you want index funds for your investing.  The fund options in the TSP are better than any others you'll ever have access to - including Vanguard's!.  Not only are the expenses low (and for an index fund, what else could you compare on?), but the G fund is better than any bond fund, period.

Of course, if this is towards a house, or a car, or if you're going ER without expecting a military pension, this might change a bit.

captainawesome

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Re: roth tsp or VanguardFINX fund
« Reply #3 on: July 31, 2013, 05:44:34 PM »
I'm wondering the same thing, I'm conflicted as to what to do with my extra money, and being in the military we seem out of the norm not going out and spending it on expensive cars.  I had previously just thrown money into a roth ira, but I feel like I can do better, and want to maximize this money.  No way in hell do I want to work a day past 20.

UltraRunning

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Re: roth tsp or VanguardFINX fund
« Reply #4 on: July 31, 2013, 05:59:08 PM »
From your title, I gather you're using VFINX - Vanguard's S&P 500 index fund.  Is that correct?

Is it in a taxable account or is it in an IRA of some sort (Roth or traditional)?

What's your goal with the money that's going into VFINX?  Is it towards a house, a car (might be inappropriate for the latter), retirement, or something else?

If it's towards retirement, I'd go heavier into the TSP - especially if you want index funds for your investing.  The fund options in the TSP are better than any others you'll ever have access to - including Vanguard's!.  Not only are the expenses low (and for an index fund, what else could you compare on?), but the G fund is better than any bond fund, period.

Of course, if this is towards a house, or a car, or if you're going ER without expecting a military pension, this might change a bit.

Sir im using the index fund  for my investing and my Roth tsp as my retirement account.  If I had to put in the twenty years to  for the pension so I was able to quit working a  "normal" job not that the military is your regular 9to 5.  Yes I was planning on using my Index fund on  my first purchase on my house when I leave  the military and enter the civilian sector of living.  Hoping that buy then I would have enough to put down 40-50% percent down on a house and figured since I cant touch my earnings out of the tsp till 59.5 that  compound interesting could make up for the lesser investment in the tsp in return for a short term mortage if I was able to but down 40-50 down on a house once I got out of the  military. 

GreenGuava

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Re: roth tsp or VanguardFINX fund
« Reply #5 on: August 01, 2013, 11:01:10 PM »

 Yes I was planning on using my Index fund on  my first purchase on my house when I leave  the military and enter the civilian sector of living. 

How far in the future do you expect this to be?  Depending on your time horizon, a stock index fund might be a wholly inappropriate way to use the money.

Hoping that buy then I would have enough to put down 40-50% percent down on a house and figured since I cant touch my earnings out of the tsp till 59.5 that  compound interesting could make up for the lesser investment in the tsp in return for a short term mortage if I was able to but down 40-50 down on a house once I got out of the  military.

Maybe.  Keep in mind that there are ways to get money out of tax-advantaged accounts before 59.5, so the TSP money isn't fully locked away (although being able to finance yourself without it until at least then is great).   Depending on the interest rates you can get, you might not even want a shorter term mortgage - there might be better uses of the money.

Nords

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Re: roth tsp or VanguardFINX fund
« Reply #6 on: August 10, 2013, 10:13:56 PM »
I currently have $1200 a month (75 percent of my income trying to follow MMM's advice)  to invest in each month.  Right now im currently putting $400 into my Roth TSP and $800 towards my Vanguard fund.  I am  currently 20 and wondering if this is the best method of investing my money between the two accounts. Should I invest heavier into the Roth TSp?  Or should I Dump almost all of my money into my Vanguard Fund? I know as I grow older and make rank ( currently in the military) that my pay will go up but looking for  a percentage  that would be best  if how im currently splitting it 66% vanguard 33% roth tsp  is up to snuff or if it would be wiser to shift these numbers around? Again appreciate all the responses from much more experienced investors.
Hey, Louie, I'm a little late to this thread.

Congratulations on maxing your savings rate!  And you're right, as you promote you'll be able to put most of those pay boosts toward your savings as well.  It makes a big difference:
http://the-military-guide.com/2011/03/16/saving-base-pay-and-promotion-raises/
The assumptions vary a little by service, rank, & specialty but you can see the trend.

At a 75% savings rate, by the end of your enlistment you'll be close to financial independence.  A few more years of savings beyond that would just add to the safety margin:
http://the-military-guide.com/2013/06/24/how-many-years-does-it-take-to-reach-financial-independence/
http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/

In general, your savings priorities should be to max out the TSP (or Roth TSP), then max out your IRA(s), and then put the rest in taxable accounts.  Since you're in a relatively low tax bracket, it's probably better to max out the Roth TSP and your Roth IRAs. 
http://the-military-guide.com/2010/12/27/where-to-put-your-savings-in-the-militar/

The TSP logic is three-fold:  the world's lowest expense ratios, the "G" fund, and "use it while you can".  Once you leave the service you'll never be able to contribute to the TSP again-- unless you're a federal civil service employee.
http://the-military-guide.com/2012/08/01/ask-your-dad-if-you-should-contribute-to-the-roth-tsp/
http://the-military-guide.com/2013/07/17/three-reasons-to-keep-your-retirement-savings-in-the-thrift-savings-plan/

You could make an exception to those generalities when you're getting ready to leave the service or saving for a specific goal like a house.  You might want to start piling up the cash for a year or two before you leave active duty (perhaps for drilling Reservist?) or for a down payment.  Keep in mind, too, that owning a home while you're on active duty is generally a very risky idea.  When you finally get to a point in your life where you expect to stay put for at least five years then it might be a good idea to own a house, but even then as a servicemember or a veteran you can take out a VA loan with no money down and no PMI.  When you get to the point of financing your home purchase you'll have to run your spreadsheet to choose among a big down payment or no money down, a 30-year loan or a 15-year loan, and whether to go VA (with its fees) or conventional.  This forum can offer plenty of help with those decisions when the time comes.
http://the-military-guide.com/2013/07/01/book-review-rent-vs-own/

One other exception on TSP contributions:  when you deploy to a combat zone, you can put up to $51K in the TSP and another $10K in the Savings Deposit Program.  The TSP contributions will be tax-free (not just tax-deferred, but tracked separately and never taxed) so you should drop everything else and attempt to max the TSP & SDP with your tax-free contributions.  Then when you leave the combat zone you can revert to your previous asset-allocation (or account-allocation) plans.

TSP withdrawals are easier than you might expect:
http://the-military-guide.com/2011/04/25/tsp-withdrawal-options/
You could also roll it over to an IRA and convert it to a Roth, wait five years, and then be able to withdraw all your contributions at any time with no penalty.

As for the rest of the military financial independence topics:  you can probably find the book in a public library near you, or buy a Kindle version on Amazon.  The first six months of blog posts (September 2010 through March 2011) are book excerpts without the personal stories or the checklists.  You can also search the blog by keywords or scan all the post titles in chronological order here:
http://the-military-guide.com/post-titles-by-month/

And ask more questions either here or on the blog!