Here’s an interesting retirement case study for you.
Let’s take a former active duty veteran who resigns after 7 years of service and enters the civilian workforce in the year 2000. This purely hypothetical employee in turn contributes to a Defined Contribution plan (401k or TSP) during his years as a working stiff. He or she contributes to the maximum ‘match’ amount of the employer’s plan- That is, when the employer matches up to 50% of contributions on up to 10% of salary, he contributes 10%. When he is a Federal Employee, he contributes 5% to get the most of the TSP automatic and matching contributions (5% of salary). (Stop me if you’ve figured out who the hypothetical employee is by now).
If you recall from last year, I resolved to roll all my IRA assets BACK in the the TSP, based on the following facts and theories:
- (Fact) TSP will soon allow much more withdrawal flexibility,
- (Fact) I’m not smarter than the market,
- (Fact) TSP Lifecycle funds have the lowest fees of any target-date fund, and
- (Theory) TSP Lifecycle funds are the best target-date funds available based on their cash-equivalent fund (the G Fund).
… so how about #4? Any way to prove this theory in to fact?
I’m going all in on the TSP this year, and here’s why. Continue reading
Maxing your 401(k) or TSP will help you get to this Happy Place faster…
There’s a lot of debate about how much you should put in to your TSP or 401(k) plan every year, and whether you should ‘front-end’ load your 401(k) at the beginning of the year, dollar cost average during the year, or back-end load your 401(k) at the end of the year for tax planning.
Here’s a 401(k) hack that works for me at the end of every calendar year.