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!