Comments on: Where Should You Invest – TSP or IRA? http://themilitarywallet.com/tsp-or-ira/ Personal finance for military, veterans, and their families Tue, 15 May 2012 15:28:43 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: Ryan Guina http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-23142 Ryan Guina Thu, 12 Apr 2012 20:11:44 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-23142 T., Yes, it is too late for the 2011 tax year. TSP contributions can only be made during the calendar year. However, you may still be able to make a Traditional IRA contribution to reduce your taxable income if you meet the income requirements to qualify for a Traditional IRA. If you don't meet the tax deduction income requirements, then consider contributing to a Roth IRA. You won't get a tax deduction, but you will still be able to contribute for the 2011 tax year. You can contribute to an IRA until the tax deadline, which is normally April 15th (this year it is April 17th). T., Yes, it is too late for the 2011 tax year. TSP contributions can only be made during the calendar year. However, you may still be able to make a Traditional IRA contribution to reduce your taxable income if you meet the income requirements to qualify for a Traditional IRA. If you don’t meet the tax deduction income requirements, then consider contributing to a Roth IRA. You won’t get a tax deduction, but you will still be able to contribute for the 2011 tax year. You can contribute to an IRA until the tax deadline, which is normally April 15th (this year it is April 17th).

]]> By: T. http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-23141 T. Thu, 12 Apr 2012 18:31:33 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-23141 I am a retired military member who currently works for the federal government. I contribute to the TSP. My agency will match up to 3% of my pay each month. It is April 2012. Is it too late for me to start and contribute to an IRA to reduce my taxable income for 2011? I am a retired military member who currently works for the federal government. I contribute to the TSP. My agency will match up to 3% of my pay each month. It is April 2012. Is it too late for me to start and contribute to an IRA to reduce my taxable income for 2011?

]]> By: Ryan Guina http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-23039 Ryan Guina Wed, 14 Mar 2012 02:14:41 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-23039 Paul, I've never heard anyone mention that it is illegal to contribute to both the Thrift Savings Plan and an IRA in the same tax year. In fact, most financial planners recommend doing so. I strongly recommend speaking with another financial planner for a second opinion. And if you want another opinion, here is one from a professional at USAA: http://askjune.military.com/2011/05/good-idea-to-stash-funds-in-both-tsp-roth-ira.html Paul, I’ve never heard anyone mention that it is illegal to contribute to both the Thrift Savings Plan and an IRA in the same tax year. In fact, most financial planners recommend doing so. I strongly recommend speaking with another financial planner for a second opinion. And if you want another opinion, here is one from a professional at USAA: http://askjune.military.com/2011/05/good-idea-to-stash-funds-in-both-tsp-roth-ira.html

]]> By: Paul May http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-23027 Paul May Tue, 13 Mar 2012 05:27:09 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-23027 I am retired Navy E6, now working in civil service (not the same job though!) and have been (almost) maxing out my TSP contributions each year since I had almost nothing to begin with when I retired, to the tune of $600 per check for $15,600 for the last year, just shy of the $16,500 allowed. I had started a traditional (mutual fund based) IRA a little while before retiring, but only $100 per month. There's not much in there, but I feel better doing it! This year, my tax lady told me I have been wrong all this time, I CAN'T contribute to my TSP and the IRA both. This seems wrong to me. I'm really PO'ed that the gov't is telling me how much I can legally save for my own retirement, but now they're restricting me even further?? How do rich people do it then?? I could understand if we can put in ANY amount into our retirement savings that we want, but only get the tax benefit up to a certain amount, but she is telling me that it's illegal to do what I've been doing. Is this right?? Confused... I am retired Navy E6, now working in civil service (not the same job though!) and have been (almost) maxing out my TSP contributions each year since I had almost nothing to begin with when I retired, to the tune of $600 per check for $15,600 for the last year, just shy of the $16,500 allowed.

I had started a traditional (mutual fund based) IRA a little while before retiring, but only $100 per month. There’s not much in there, but I feel better doing it!

This year, my tax lady told me I have been wrong all this time, I CAN’T contribute to my TSP and the IRA both. This seems wrong to me. I’m really PO’ed that the gov’t is telling me how much I can legally save for my own retirement, but now they’re restricting me even further?? How do rich people do it then??

I could understand if we can put in ANY amount into our retirement savings that we want, but only get the tax benefit up to a certain amount, but she is telling me that it’s illegal to do what I’ve been doing.

Is this right??

Confused…

]]> By: Ryan Guina http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-17218 Ryan Guina Sat, 16 Jul 2011 19:32:01 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-17218 William, you have great points, and for the right kind of investors, the added flexibility might be worth it. But many people don't have the knowledge or discipline to invest outside of a structure retirement account and still maintain a low cost and low tax investment portfolio. The early withdrawal penalties also act as a deterrent to some investors and prevents them from making withdrawals that would otherwise hurt their chances at a fully funded retirement. In the end it comes down to personal preference and investing abilities. William, you have great points, and for the right kind of investors, the added flexibility might be worth it. But many people don’t have the knowledge or discipline to invest outside of a structure retirement account and still maintain a low cost and low tax investment portfolio. The early withdrawal penalties also act as a deterrent to some investors and prevents them from making withdrawals that would otherwise hurt their chances at a fully funded retirement. In the end it comes down to personal preference and investing abilities.

]]> By: William McArthur http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-17216 William McArthur Sat, 16 Jul 2011 12:46:58 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-17216 Every article I see touts how great it is to put tax-free money into the TSP while deployed. I don't see much benefit to it. In the TSP or in a taxable mutual fund, you will never pay taxes on the principal and in both will pay capital gains tax when it's withdrawn. The only benefit to the TSP would be avoiding earnings income tax along the way, which can be minimized by investing in the right mutual funds. Even so, that's a small price to pay for the flexibility of not having it tied up till age 59.5. The articles I've read tout how great it is to be able to remove that tax-free money during retirement, but you could do that in either case. Am I off the mark? Every article I see touts how great it is to put tax-free money into the TSP while deployed. I don’t see much benefit to it. In the TSP or in a taxable mutual fund, you will never pay taxes on the principal and in both will pay capital gains tax when it’s withdrawn. The only benefit to the TSP would be avoiding earnings income tax along the way, which can be minimized by investing in the right mutual funds. Even so, that’s a small price to pay for the flexibility of not having it tied up till age 59.5. The articles I’ve read tout how great it is to be able to remove that tax-free money during retirement, but you could do that in either case. Am I off the mark?

]]> By: Ryan Guina http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-16805 Ryan Guina Tue, 03 May 2011 18:10:13 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-16805 Robert, No, the TSP does not count toward your IRA contribution limits, however, there are limits to the deductible Traditional IRA, which can be found here: <a href="http://cashmoneylife.com/traditional-roth-ira-contribution-limits/" rel="nofollow">IRA Contribution Limits</a>. Thanks for your service! Robert, No, the TSP does not count toward your IRA contribution limits, however, there are limits to the deductible Traditional IRA, which can be found here: IRA Contribution Limits.

Thanks for your service!

]]> By: Robert Carroll http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-16804 Robert Carroll Tue, 03 May 2011 18:02:10 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-16804 I am retired active duty and now in the Civil Service. I am contributing now to my TSP account. Taxes hit me hard this year and I wanted to contribute to a Traditional IRA to lower my taxable income. The IRA has a max contribution on $5K per year. Does my contributions into TSP count against this limit? I am retired active duty and now in the Civil Service. I am contributing now to my TSP account. Taxes hit me hard this year and I wanted to contribute to a Traditional IRA to lower my taxable income. The IRA has a max contribution on $5K per year. Does my contributions into TSP count against this limit?

]]> By: Patrick Long http://themilitarywallet.com/tsp-or-ira/comment-page-1/#comment-15263 Patrick Long Wed, 26 Jan 2011 14:46:04 +0000 http://themilitarywallet.com/2007/09/25/tsp-or-ira/#comment-15263 Question about TSP: I'm a Guardsman deployed through September. I will not be able to put in the full $49k that I'm allowed for the year prior to that time, but will be able to put in more than $16,500. When I go home, can I keep putting my drill pay in, or am I cut off for the year? What about GI Bill money? Question about TSP: I’m a Guardsman deployed through September. I will not be able to put in the full $49k that I’m allowed for the year prior to that time, but will be able to put in more than $16,500. When I go home, can I keep putting my drill pay in, or am I cut off for the year? What about GI Bill money?

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