lsimpson33
Dryer sheet aficionado
- Joined
- Jan 16, 2018
- Messages
- 37
I'm working with an 18-year-old US Navy mentee.
He's been contributing to the Navy Thrift Savings Plan (TSP) Roth (confirmed that it is the ROTH) and his YTD is $200 as of 3/31/2021. He does have the option of switching over to their Deferred Contribution Plan (401k-like) if that would ever make sense.
In May, he'll receive a sign-on bonus of around $27k.
They will not allow him to do a lump sum payment to fully fund the Roth with the TSP. While I know he could increase his % contribution limits and live off some of the extra cash, I don't think he's at that discipline level yet to not spend it. I'm also trying to minimize his taxes at this point.
He does want to retire early, but he's still very young, so I'm more worried about taxes than building up a non-retirement account.
Here's the plan. Thoughts? Better options?
Thanks in advance for any thoughts or advice.
He's been contributing to the Navy Thrift Savings Plan (TSP) Roth (confirmed that it is the ROTH) and his YTD is $200 as of 3/31/2021. He does have the option of switching over to their Deferred Contribution Plan (401k-like) if that would ever make sense.
In May, he'll receive a sign-on bonus of around $27k.
They will not allow him to do a lump sum payment to fully fund the Roth with the TSP. While I know he could increase his % contribution limits and live off some of the extra cash, I don't think he's at that discipline level yet to not spend it. I'm also trying to minimize his taxes at this point.
He does want to retire early, but he's still very young, so I'm more worried about taxes than building up a non-retirement account.
Here's the plan. Thoughts? Better options?
- Open a second Roth for 2021 and put $5,600 in that ($800 is going into the TSP and $100 buffer, so a total of $6,500 for the tax maximum).
- Put the rest of the money in a CD or something else where he can't touch it until 2022, then max out his Roth again. Then put the rest in a CD, rinse and repeat for 2023.
Thanks in advance for any thoughts or advice.