Untitled Thread

Here’s how I invested while I was on active duty:

1. Maxed out Roth TSP
2. Maxed out Roth IRA
3. When I had a little extra unspent cash (being underway on a ship for example), I added that to my taxable brokerage account.

Here’s how I’m making my TSP accessible earlier in life:

1. Left military at the end of my contract in 2022.
2. Rolled my Roth TSP to my Roth IRA.
3. Since I was in BRS, my match was in Traditional TSP; one TSP account number for both Traditional and Roth, just two different “buckets” within the account. So I rolled my Traditional TSP balance to a Rollover IRA that I’d just opened for the event and had $0 in it.
4. After rolling my Traditional TSP to my Rollover (Traditional) IRA, I converted the entire balance to my Roth IRA. I think I paid something less than $1000 in taxes on a $8000-ish Traditional balance, thanks to 2022 being a down year in the market.
5. The Conversion started one of the so-called 5-year clocks on my contributions only (not gains, just contributions I made during my contract). In 5 years after 2022 (2027), I could technically access my TSP contributions that are now all in my Roth IRA. But hey, I’m only in my 30s, I’m going to let that continue to compound until I really decide to stop working part time, and/or after I empty my taxable account that had also been compounding. In the meantime I’ll spend my tax-free VA Disability Compensation on the household cash flow.

www.fidelity.com | What is the Roth IRA 5-year rule and how does it work? | Fidelity

It’s a frequent question, @Georgiab. Here’s the citation in federal law:

www.law.cornell.edu

“(a)For purposes of the Internal Revenue Code of 1986—

(1)the Thrift Savings Fund shall be treated as a trust described in section 401(a) of such Code which is exempt from taxation under section 501(a) of such Code;”

(That excerpt goes on for a coupe more paragraphs into specific differences between 401(k)s of for-profit corporations and the TSP of the federal govt.)

The biggest difference is that the federal govt is not a for-profit corporation...

www.tsp.gov

“Established by Congress in the Federal Employees’ Retirement System Act of 1986, the TSP offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans.”

… but for our military TSP purposes it’s treated as a 401(k).

And yes, you can do all the same strategies to access funds early from the TSP. That typically happens by rolling your TSP account(s) over to your IRA(s) and then using early-withdrawal tactics. Here’s how you can do it without rolling over your TSP account, but after you leave the military:

themilitarywallet.com

And yes, if you’re military active duty then you should invest in your TSP. If you’re in the military’s Blended Retirement System then you need to invest at least 5% of your base pay to receive DoD’s matching BRS contributions. (I’m guessing that you’re not in the BRS because that has a default enrollment every January.) Even if you’re in the legacy High Three pension system you can still invest in the TSP for much higher limits than your IRA, and with similar early access after leaving the military.

Yes, a TSP is essentially the 401K available to military and government employees. It is a pre-tax account, so you will definitely want to max that out at least up to the point that is matched. Matching is free money. I'd suggest investing that money into a S&P index fund.

Not an expert on TSPs but it looks like a ROTH conversion feature is available starting next year.

I'm not sure what you mean by accessing money early in retirement. I retired at 50 and live strictly off my non-retirement investment accounts. I suppose once you start a ROTH ladder you could withdraw the base amounts after 5 years, but with tax free growth, it seems better to me to leave it all in for now.

Having been in the military and got out to get an MBA, I'm wondering how you view a pension in your decisions for FI. I left before being eligible, but a pension can be a great support for early retirement.