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TSP

Administered by the Federal Retirement Thrift Investment Board, this defined contribution plan for federal employees has roughly 4,614,874 participants, and over $358 billion in assets under management. Ask your TSP questions and post related topics here.

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colty31  
#1 Posted : Wednesday, July 24, 2019 6:47:46 PM(UTC)
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TSP & IRA V. TSP ONLY

What are the main advantages and disadvantages of these two methods?

From my understanding, both accounts would work almost the same way. Each are an investment account that can be invested in various stocks/bonds. I understand that if you are MAXIMIZING your yearly TSP contribution, then it could be beneficial to have an additional IRA (or HSA) account.

BUT,

If you're not maximizing your TSP, is there any reason to have a separate IRA? Seems like it would make more sense to just keep everything in the TSP and increase your allocation % when you can.

Edited by user Wednesday, July 24, 2019 6:49:00 PM(UTC)  | Reason: Not specified

Rikaku  
#2 Posted : Thursday, July 25, 2019 5:20:40 AM(UTC)

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The benefit of opening an IRA, regardless if you've maxed TSP or not, is that IRA contributions (but not gains) can be withdrawn at anytime penalty free thus giving you greater control of your money. Plus, an IRA with an investment firm would have a lot more investment options than TSP's selection.

Me personally, my order of preference is max TSP first, max IRA second, then contribute to a taxable brokerage account.
TheRealOrange  
#3 Posted : Thursday, July 25, 2019 7:19:41 AM(UTC)
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Originally Posted by: Rikaku Go to Quoted Post
The benefit of opening an IRA, regardless if you've maxed TSP or not, is that IRA contributions (but not gains) can be withdrawn at anytime penalty free thus giving you greater control of your money. Plus, an IRA with an investment firm would have a lot more investment options than TSP's selection.

Me personally, my order of preference is max TSP first, max IRA second, then contribute to a taxable brokerage account.

Your order of preference makes complete sense, but I don't think your comment about IRA withdrawals is necessarily correct. For Roth IRAs, you can withdraw your regular contributions (not the earnings) at any time and at any age with no penalty or tax because your Roth IRA contributions are made with after-tax dollars. For a traditional IRA, before you can receive distributions before age 59 1/2 without paying the 10% early withdrawal penalty, one of the following conditions must apply:

* You have unreimbursed medical expenses that are more than 10% of your 2019 AGI.
* The distributions aren’t more than the cost of your medical insurance due to a period of unemployment.
* You’re totally and permanently disabled.
* You’re the beneficiary of a deceased IRA owner.
* The distributions aren’t more than your qualified higher education expenses.
* You use the distributions to buy, build, or rebuild a first home.
* The distribution is due to an IRS levy of the qualified plan.
* The distribution is a qualified reservist distribution.
* You’re receiving distributions in the form of an annuity, in which case these conditions must apply:
* The distributions must be part of a series of substantially equal periodic payments over your life. They could also be over the joint lives of you and your beneficiary. You’ll need to use a distribution method the IRS approves, and you must take at least one distribution annually.
* You must continue making the withdrawals for at least five years and until you’re at least age 59 1/2.
Rikaku  
#4 Posted : Thursday, July 25, 2019 8:44:05 AM(UTC)

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Originally Posted by: TheRealOrange Go to Quoted Post
Originally Posted by: Rikaku Go to Quoted Post
The benefit of opening an IRA, regardless if you've maxed TSP or not, is that IRA contributions (but not gains) can be withdrawn at anytime penalty free thus giving you greater control of your money. Plus, an IRA with an investment firm would have a lot more investment options than TSP's selection.

Me personally, my order of preference is max TSP first, max IRA second, then contribute to a taxable brokerage account.

Your order of preference makes complete sense, but I don't think your comment about IRA withdrawals is necessarily correct. For Roth IRAs, you can withdraw your regular contributions (not the earnings) at any time and at any age with no penalty or tax because your Roth IRA contributions are made with after-tax dollars. For a traditional IRA, before you can receive distributions before age 59 1/2 without paying the 10% early withdrawal penalty, one of the following conditions must apply:

* You have unreimbursed medical expenses that are more than 10% of your 2019 AGI.
* The distributions aren’t more than the cost of your medical insurance due to a period of unemployment.
* You’re totally and permanently disabled.
* You’re the beneficiary of a deceased IRA owner.
* The distributions aren’t more than your qualified higher education expenses.
* You use the distributions to buy, build, or rebuild a first home.
* The distribution is due to an IRS levy of the qualified plan.
* The distribution is a qualified reservist distribution.
* You’re receiving distributions in the form of an annuity, in which case these conditions must apply:
* The distributions must be part of a series of substantially equal periodic payments over your life. They could also be over the joint lives of you and your beneficiary. You’ll need to use a distribution method the IRS approves, and you must take at least one distribution annually.
* You must continue making the withdrawals for at least five years and until you’re at least age 59 1/2.



You are correct. I was only thinking of Roth IRA, but for a traditional IRA those rules on withdrawals do apply.

roger.d  
#5 Posted : Friday, July 26, 2019 8:16:43 PM(UTC)
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Depending on the fund/fund family, the expense ratio is getting to be the same or less than the TSP expense ratio.


Prior to this/next year, the withdrawal options for the TSP were not user friendly. Advantage to the IRA's. After 2019 the playing field looks to be even.
Learn to discipline yourself, so someone else doesn't have to
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