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Feds/vets: Have you maxed your TSP contribution yet?
Old 09-26-2007, 09:47 PM   #1
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Feds/vets: Have you maxed your TSP contribution yet?

Spouse is on a week of active duty at the "Homeland Security Planner" seminar. (Guess where the Reserves are finding their money these days.) It's about as exciting as it sounds, but the students include civil-service staff as well as active-duty & Reserve officers.

She was chatting with one of the civilians when she realized that he used to be a submarine lieutenant who'd separated after eight years. He said that he stayed on active duty for his total obligation, no Reserve time required, so that he could make a clean break from the military and start a civil-service career. When she told me about him that evening, I was curious how he transferred his military Thrift Savings Plan account over to his civil-service TSP account. (I know that enlisted veterans used to be able to buy some sort of civil-service pension credit with their enlisted service, but I don't know if that applies to officers or TSP accounts.) So spouse asked him the next day what he had decided to do with his military TSP account.

He responded with the following "famous naval saying": "Oh, I didn't put anything in the TSP during the last eight years. I can find better places to invest my money."

When asked what those asset classes would be, his response was "Well, I haven't sorted that out yet, but I didn't see anything in the TSP that I wanted to put my money into."

Ooooooookay. Must've been a helluva mercenary nuke too.

Well, anyhow, he's achieved what he was looking for-- a clean break from the military. Hope he does better in the civil service, although I'm not holding my breath...

But I'm still curious. Anyone know if officer veterans can transfer their military TSP accounts if they've become federal civil-service employees, or do they have to leave that military account compounding away while they start a second civil-service TSP account? And can former officers use their active-duty service to somehow buy time toward a civil-service pension?
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Old 09-26-2007, 11:34 PM   #2
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I was curious how he transferred his military Thrift Savings Plan account over to his civil-service TSP account. (I know that enlisted veterans used to be able to buy some sort of civil-service pension credit with their enlisted service, but I don't know if that applies to officers or TSP accounts.)

But I'm still curious. Anyone know if officer veterans can transfer their military TSP accounts if they've become federal civil-service employees, or do they have to leave that military account compounding away while they start a second civil-service TSP account? And can former officers use their active-duty service to somehow buy time toward a civil-service pension?
Officers and enlisted may combine their military TSP account with their Civil Service TSP account. You can also buy time toward civil-service pension. Done it.
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Old 09-27-2007, 06:35 AM   #3
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Yes - - I am a civilian fed employee and I have maxed out my TSP for the past 7 years, plus over-50 catch up once it was available, contributing every last possible cent and getting every possible cent of federal match.

I never finish contributing the whole $20K this early in the year, though, because I would lose some matching if I did.

Vets are favored (given points) in the hiring process for civilian federal employment, so a lot of civilian feds are vets. I am surprised at how many feds only contribute enough to get the matching funds, if that. To me, this is an easy and relatively painless way to put money aside. Guess some of them are expecting a bigger pension than mine will be so maybe that's why they don't feel the need to contribute much to TSP.
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Old 09-27-2007, 10:59 AM   #4
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Another civilian Fed, so I can't answer your question about military TSPs. I've maxed out for years, including the over-50 catch-up. I'm CSRS so unfortunately no matching funds, but I take as many pre-tax deductions as possible. In 2008, I'll be puting all of my salary into my TSP up until the time I retire in Feb. It won't quite max out, but will be a nice final chunk of change into retirement savings.

Another thing that I'm surprised many of my coworkers don't take advantage of are FSAs. With a kid in braces, I used the max this year. And I only wish they had had FSAs when my kids were in day care. Since I'll be retiring in Feb 2008, I'm keeping my fingers crossed that this is the year Congress approves pre-tax deductions for retiree health insurance premiums.
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Old 09-27-2007, 01:05 PM   #5
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Since I'll be retiring in Feb 2008, I'm keeping my fingers crossed that this is the year Congress approves pre-tax deductions for retiree health insurance premiums.
Don't hold your breath! I keep hoping this will be approved also, but it never seems to happen.
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Old 09-27-2007, 01:14 PM   #6
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Officers and enlisted may combine their military TSP account with their Civil Service TSP account. You can also buy time toward civil-service pension. Done it.
Thanks, I've been seeing that question a lot!

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Guess some of them are expecting a bigger pension than mine will be so maybe that's why they don't feel the need to contribute much to TSP.
I'd rather put pre-tax earnings into a tax-deferred account with the world's lowest expense ratios.

In fact we'll keep cashing in our taxable portfolio (even at a 0.25% expense ratio) to pay our living expenses while putting all of spouse's Reserve salary in her TSP and her Roth IRA. I can't see any downside...
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Old 09-27-2007, 02:22 PM   #7
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Another thing that I'm surprised many of my coworkers don't take advantage of are FSAs. With a kid in braces, I used the max this year. And I only wish they had had FSAs when my kids were in day care. Since I'll be retiring in Feb 2008, I'm keeping my fingers crossed that this is the year Congress approves pre-tax deductions for retiree health insurance premiums.
The FSA's are pretty sweet when you've got known medical expenses [OT, braces, doc visits, etc].

Unfortunately, with daycare running $8-12,000/year for, depending on how many kids you've got, the $5,000 per year only helps so much, but it's better than nothing. Too bad you can't double up if you've got two kids or two jobs.

Though we aren't maxing out DW's TSP yet, we'll probably be up to that level in a couple of years, as long as we get her spending our expenses under control.

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Old 09-27-2007, 02:28 PM   #8
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[quote=Nords;560100
And can former officers use their active-duty service to somehow buy time toward a civil-service pension? [/quote]

For NJ state employees, prior active military service, regardless of rank, may be purchased towards pension (up to 10 years if not considered a Veteran, up to 15 years if Veteran status granted by state*) as long as said Veteran is not collecting a pension from active duty.

I am considering my buyback of 11.4 years in the form of payroll deductions a retirement investment!

*must have served in combat/hazardous area to meet this qualification if not a Korea or Vietnam veteran.
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Old 09-27-2007, 06:42 PM   #9
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I just "bought back" my active duty time with civil service. I wrote a check for $8263.47, which will add 4 1/2 years to my eventual CSRS pension, increasing the monthly amount I receive by 9 percent for life. Well worth the 8 grand, but if I had taken care of this in '86 before the end of the 3 year grace period all employees get, it would've only cost me $2600 instead. After the grace period for buy-back, interest is assessed annually. In addition to being a federal employee, I'm also an Air Force reservist (enlisted) with 30 yrs. I have some money in the military TSP, but most of my savings are in the civilian one. Yep, I have 2 TSP accounts. I'm not allowed to move the military TSP money into the civilian one. At least that's the answer I got when I called the "Thrift Line" at the TSP. Being that I'm under the older CSRS retirement system (meaning I get a larger DB pension with full COLA for life) I'm not entitled to matching agency money in my TSP. All I get is proceeds from the investments. Still, it's tax deferred and yes, I'm maxing at the IRS limit. In four months, I'll be 50 and will then begin the catch-up contributions.

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Old 09-27-2007, 08:55 PM   #10
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In addition to being a federal employee, I'm also an Air Force reservist (enlisted) with 30 yrs. I have some money in the military TSP, but most of my savings are in the civilian one. Yep, I have 2 TSP accounts. I'm not allowed to move the military TSP money into the civilian one. At least that's the answer I got when I called the "Thrift Line" at the TSP.
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If you are now retired from the Air Force reserve, you may move your military TSP and combine it with your civilian TSP account. You can not move the account prior to retiring from the military. They may have thought you were still active reserve. At 30 years I assume you are now out unless you have a waiver. They kept me in the Coast Guard for over 38 years with waivers.
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Old 09-28-2007, 01:16 AM   #11
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Also, there are different active duty and reserve TSP accounts - or at least there were when I switched from active duty to Reserves - administered differently somehow.

Nords, I'm like your wife - all of my Reserve pay goes into the TSP right now - I don't have anything going into my 403B (except for my employer's contributions) - the TSP has the best expense ratio. As for a Roth, hoping my husband and I don't go over the earning amount this year for non-eligibility - had to remove some of the Roth last year - *love* the Roth - cry when I can't contribute.
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Old 09-28-2007, 09:24 AM   #12
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He responded with the following "famous naval saying": "Oh, I didn't put anything in the TSP during the last eight years. I can find better places to invest my money."

When asked what those asset classes would be, his response was "Well, I haven't sorted that out yet, but I didn't see anything in the TSP that I wanted to put my money into."

Ooooooookay. Must've been a helluva mercenary nuke too.
Doesn't that just make you proud? I was doing a mid term feedback on a young CGO yesterday and the subject of TSP came up. He said he had never thought about it. I showed him a couple to TVM calculations and kind of shared with him my story. His eyes lit up and I think I made some headway with him. Of course it could just have been a deeer in the headlights look instead.

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Old 09-28-2007, 09:56 PM   #13
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If you are now retired from the Air Force reserve, you may move your military TSP and combine it with your civilian TSP account. You can not move the account prior to retiring from the military. They may have thought you were still active reserve. At 30 years I assume you are now out unless you have a waiver. They kept me in the Coast Guard for over 38 years with waivers.
Nope, I'm not retired yet, still have 5 yrs to go. I'm at 30 1/2 yrs right now, and if I don't change jobs, I'll have another 5 yrs till I retire from both the reserves and my fed civilian job. I'm an Air Reserve Technician, which is dual status so they have to let me stay in the reserves until I reach age 55 and can retire from my civil service job without any penalties for early departure. Normal high year of tenure is 33 yrs. When I go, I'll have about 36 yrs military and civilian. I had to stop contributing to my military TSP so I could max out the civilian one. I'm only allowed to hit the IRS max once, no matter how many 401/TSP accounts I have so it just made sense to keep all the eggs in the larger basket. I'll probably have enough in the military TSP to take a real nice retirement vacation trip, but that's about it. Unless I do what you said and roll it into the civilian one. However, I seem to recall reading that you could only make contributions to the TSP while you were working. Haven't seen anything about combining accounts after retirement. Do you happen to have any references for that?
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Old 09-29-2007, 12:54 AM   #14
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I'll probably have enough in the military TSP to take a real nice retirement vacation trip, but that's about it. Unless I do what you said and roll it into the civilian one. However, I seem to recall reading that you could only make contributions to the TSP while you were working. Haven't seen anything about combining accounts after retirement. Do you happen to have any references for that?
Marty,

While I know you can not make additional contributions after retirement, I do not know if you can combine accounts after retirement. Personally, I would convert the smaller military TSP account to a ROTH IRA upon retirement.
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Old 09-29-2007, 04:50 PM   #15
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Personally, I would convert the smaller military TSP account to a ROTH IRA upon retirement.
When spouse retires we think we'll be leaving her TSP in the "S" fund as long as we possibly can. We have no desire to get rid of the only 0.03% expense ratio we'll ever be able to participate in.

I'm still not sure whether it's better to annuitize it or to move it. That's going to depend on tax rates & expense ratios in the year 2020...
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Old 09-29-2007, 08:45 PM   #16
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When spouse retires we think we'll be leaving her TSP in the "S" fund as long as we possibly can. We have no desire to get rid of the only 0.03% expense ratio we'll ever be able to participate in.

I'm still not sure whether it's better to annuitize it or to move it. That's going to depend on tax rates & expense ratios in the year 2020...
At first glance it seems to me leave it as long as you can. But running the numbers could change my opinion I guess. I am just trying to figure out how I can get more in.

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Old 09-29-2007, 09:07 PM   #17
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Nords, why the S fund versus one of the Lifecycle funds or one of the others or a combination thereof. What's the S fund got goin' on that would make it a good place to park your money after retirement? I admit I don't know much.
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Old 09-30-2007, 12:08 AM   #18
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Nords, why the S fund versus one of the Lifecycle funds or one of the others or a combination thereof. What's the S fund got goin' on that would make it a good place to park your money after retirement? I admit I don't know much.
Mostly a process of elimination, starting with bonds. I have a military COLA pension and spouse will get her own in 2022, so neither of us needs any bonds in our ER portfolio. We also don't need to invest in the "C" fund since we already own Berkshire Hathaway and a Dow dividend fund. That leaves the "S" & "I" funds.

The military version of the TSP came along in the late 1990s, it was a way cheaper expense ratio than most small-cap funds, and small-caps were undervalued then so that's what we started with. Now that they've added the "I" fund I could go there too, especially since international funds tend to have much bigger ERs than other asset types.

I used to spread the asset classes indiscriminately among our separate accounts (taxable & tax-deferred) but entering all those dividends & reinvestment transactions in Quicken has become a colossal PITA. (I do it manually-- too many download errors.) The TSP is an extremly small portion of our total ER portfolio so it might as well stay all in one asset class. I'm much happier with all our international in our Roth IRAs and the rest of our asset allocations in our Fidelity account.

If the international grows faster than we can rebalance in the taxable then I'd have a different problem, but I'm betting that they won't get too far out of whack. It'd also be easier (non-taxable) to rebalance by shifting big chunks of an IRA than by messing with a taxable account.
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Old 09-30-2007, 01:50 AM   #19
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When spouse retires we think we'll be leaving her TSP in the "S" fund as long as we possibly can. We have no desire to get rid of the only 0.03% expense ratio we'll ever be able to participate in.

I'm still not sure whether it's better to annuitize it or to move it. That's going to depend on tax rates & expense ratios in the year 2020...
You can't beat the low ER of a TSP account. I am 63 and therefore in a different position than you. While I really like the low maintenance cost, I like getting the $ into a ROTH even more. My TSPs have been rolled into a TIRA and are being aggressively converted to RIRAs (along with my DW 403(b)) prior to turning 70.
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Old 09-30-2007, 11:38 AM   #20
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I rolled my military TSP (reserve account thru the national guard) into my civilian TSP when I retired from the NG. Wished I could have done it sooner, but I had to wait until I was retired to do so. Having two accounts was a PITA.

Have not maxxed it out yet. I'm at 18% of salary and plan to bump it up by 1% every raise I get (Jan COLA).

I also bought my active duty time (only 9 months or so of mostly training- Baisc, AIT, OBC) which adds to my FERS dates.
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