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Originally Posted by virginia
I did some searching around, but could not find the answers I need in regards to TSP.
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Have you cruised around TSP.gov? It's big and it's messy so there's lots of buried treasure.
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Originally Posted by virginia
1) When contributions are made in a combat zone, and are labeled as "exempt" - is that the same as having contributed to a Roth IRA? Is that money forever not taxable?
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Yep, that's my understanding of the current legislation. You'd track it through your tax returns.
Congress fixed the earned-income/IRA issue recently too, so even if you have zero earned income in that combat zone you can still contribute to an IRA as well as max out the TSP.
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Originally Posted by virginia
H2) When the TSP booklet talks about withdrawing upon retirement - that is military or federal service retirement - correct? Want to make sure that the money that I'm putting in now will be available upon military retirement, not in my 60's.
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Um, not so fast. The TSP resembles most tax-deferred investments in that you either have to tap it when you're older than age 59.5, or meet some kind of exemption, or withdraw via a 72(t) system.
When I retired at age 41 I had to roll my pitiful TSP balance over to an IRA. When spouse retires at age 49 she'll leave her more respectable balance with the TSP for a few years and then eventually roll it over to an IRA for conversion to a Roth before age 60 (when her Reserve pension kicks in). But we don't anticipate needing to touch the TSP money for a looooong time.
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Originally Posted by virginia
3) I currently have 100% of the money in the C fund. I know this needs to change. I currently have 12 years active service. Should I break this down into the C, S and I funds or go ahead and do a Lifecycle fund? My inclination is to go with the Lifecycle 2030 fund, because the 2020 fund seems to0 conservative for me - too much in fixed income, but don't want to be foolish either. I don't like moving in and out of funds a lot, so I think that a Lifecycle fund will be for me.
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It only "needs" to change to the extent of your "sleep at night" comfort zone, your overall asset allocation (TSP as well as IRAs and any investments in taxable accounts), and your interest in tinkering with the system. Many people would be perfectly happy with a "fire & forget" lifecycle fund.
If you think you're gonna be hanging around for a pension then you could consider going 100% stocks with your TSP funds, perhaps even just splitting between the I & S funds. International investing is generally a higher expense ratio but the TSP does it at just a 0.03% expense ratio, so that's a great bargain. Same for small-cap stock funds, although there's less of an expense difference. You could always adjust the asset allocation if you transfer to the Reserves or separate, but for now you have plenty of earnings power to get you through the bear markets.
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Originally Posted by virginia
4) When I pull from the C fund and invest in other funds, will the gains be taxed? I don't think so, but want to be sure
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No taxes on anything done inside the TSP. You're only taxed if you withdraw the money (or convert it to a Roth IRA).
Many people rebalance their overall asset allocation by moving money around in their tax-deferred accounts to avoid having to make taxable transactions in their taxable accounts. Many equity traders also use IRAs for the same reason.
Still, I think that I could be doing worse than retiring at 55 in 4 + yrs from now with 2 COLA pensions and my TSP from uncle sugar. Too bad I have to wait 5 extra yrs to start drawing the military money, though.
Mentally, I'm already in retirement mode, I think!
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