I agree with the L fund advice... Think your strategy of maxing the ROTH first, then TSP (my personal game plan) is the way to go. Only time I switch this up is when a tax free pops up, then I try to max that month's contribution, but that's tricky in the reserves!

Thanks for the inputs folks...It difficult to know if your game plan is sound or going to work...I'm just glad I'm in the game and have a good job...

Couldn't disagree more, especially if the guy you're giving the advice to is currently in a high tax bracket. Every time I read about airline/military guys with likely 6 figure+ incomes telling everyone how they're maxing out their Roth 401K or IRA, in lieu of a deductible option without telling us how they actually arrived at that conclusion, I cringe. Uncle Sugar likes it though.

Roths IRAs/401Ks are great. Deductible IRAs/401Ks are great too. They're tools just like a hammer. Sometimes a hammer is a great tool. Sometimes it isn't. Just because one has the ability to use a hammer or a Roth doesn't mean they should.

P.S. Love the TSP. Wish all state employees could contribute to it, too.

Ran across this on fedsmith and thought I'd post...

have read a similar argument by other people and my assumption is that they are kidding themselves because they feel better than they would if they actually calculated how much money they would have had with more aggressive investing in stocks. That is just my opinion but I did some calculations using a calculator readily available to anyone to come up with an example.

Here is an example. The C fund has returned a little more than 11% a year, on average, since it was started in the 1980's (that includes the big up years and the big down years). If you took $10,000 and invested it in the C fund when it started (the first full year of returns was in 1988), and did not invest a single penny more, that $10,000 as of January 1, 2013 would be worth about $135,854 (based on returns through all of 2012.)

What about the G fund? It has had an average rate of return of 5.6% since its first year of returns in 1988. If you took that same $10,000 as the nest egg investment you used for the C fund but put it into the G fund instead, did not invest any more money in the TSP G fund, and let it ride for 25 years, as of January 1, 2013, you would have had a total of $39,048.

Obviously, most people would rather have almost $136,000 instead of $39,000. That is a very large price to pay in order to achieve the "safety" of the G fund.

A better example since most people would invest some money into the TSP on a regular basis: Assume you started off with the same $10,000 referenced above in 1988 and invested $100 per month for 25 years. In the G fund, as of January 1, 2013, you would have a total of: $104,779.

On the other hand, if I were a much smarter investor and put all of my money in the C fund by starting off my initial investment the the $10,000 nest egg, added $100 a month for 25 years, as of January 1, 2013 I would have a total of: $288,253 in stead of $104,779.

That roller coaster ride you referenced, to some people, would be worth an extra $183,474 to put up with the ups and downs of the stock market.

So, I am not sure why you think the C fund money would only be worth $1.05 as that does not make sense based on the magic of compounded returns you would see with the more aggressive investment

By the way, so no one thinks i just made up the figures from thin air, I just used the calculator on Dave Ramsey's website using the figures noted above. I took the average rate of return for the two funds as calculated by the author in the article at 2013 Archive - FedSmith.com... to arrive at the figures.

Good advice, even better its backed with facts. The roller coaster ride is your risk tolerance. Near the bottom of this last downturn, it was scary how close my balance was to just my lifetime contributions. I was still mostly C fund and rode it back up again to a much better balance. The point is if you you needed to withdrawl that money for retirement it won't be there for the ride back up. That's why I am now mostly L fund. In order to be more aggressive, I am in longer term funds (for example L2040 rather than L2020) even though I'll be retired soon and flying for fun and profit.

Congrats on making it to retirement...Do you do any or did you in the past do any interfund trades? I know TSP lets you do two per month.

I did the 401K max thing as a contractor for years and I agree with the tax break aspect of your post...Its just that in the past year I've had some life experiences and am unable to max it out and can only put in the minimum to get the full match from the fed government. Once the legal bills are paid ( September 2014) I can get back to putting more into 401 until I max it out...

Retiring at 62 (minimum age needed to get 1.1% vs. 1% towards retirement) with 30 years...$75K highest average 3 years...

The largest portion of our retirement will be our TSP followed by social security. Our retirement is 1.1% of our highest 3 year average salary for each year of service. If one has 30 years, for example, he or she will get 33% of the highest 3 year average salary. If, for example, the highest average 3 years is $75K, then the yearly pension is less than $2,100 a month. The social security amount will be slightly greater than this and assuming a 15% TSP contribution, The monthly TSP distribution would be quite a bit more. For many years, we experienced very low pay and small increases in exchange for reasonable benefits. We have had no raise in more than 4 years and prior to that saw raises under 2%, even when private employees saw huge raises in the 1990's. The purpose of the FERS system is to help compensate for our lower pay increases.

A few but not often. Near the end of the bubble in 2007 I had "a feeling" things were getting too high and I meant to pull some out of the C fund but I never did. Then when it tanked the only thing pulling out would do in my opion was lock in the loss. Hence the ride down and up. That is part of why I'm in the L funds now. That said, it also proves over the long term what stocks can do.

Hello all, I apologize for crashing the thread, but he's a real noob question(s); as a guardsman, is it worth getting into TSP? I have an American Funds Roth IRA since high school, and Roth 401k with small match from my civilian employer. Is there any reason to get into TSP, or should I instead just use the same amount of money to put in my American Funds IRA? Also, I notice you talk about Vanguard. What do you think of them? Vanguard has piqued my interest, but I believe their initial investment minimum is $3,000. If I were still single, no problem. But with anything now, my wife nixes just about any spending I do.