Good Evening All,
I have been a lurker on this forum for a year and change now and finally had an idea I needed to vet and I think this would be the most appropriate place.
Ok, a little about me and my situation. Sorry for the long read.
Age: 27
Active Duty US Marine Corps
Financial Situation:
TSP: $50,000 (L-2050)
Vanguard:
-Roth IRA: $10,000 (Wellington)
-Taxable: $48,000 (Managed Payout Growth + Distribution, all distributions are re-invested automatically.)
Growing up I knew you had to work until you were 60-65 before you could retire. It wasnt until a few years ago I found MMM and then found this forum and bogleheads.org and learned that it was possible to retire early without winning the lottery.
I became a dividend investor and have been working to build up a passive inflow to supplement and to hopefully replace my income, especially considering I am looking at retiring from the military.
The problem: I cannot touch my TSP until I am 60, and I would like to retire before 45 (Adjustable, but an aggressive goal gives me something to strive for). This goal fits and I am on track to make it happen, assuming inflation and the markets want to work with me.
Crazy Idea that needs an outside opinion:
-The TSP offers General Purpose loans at a ridiculous interest rate (1.5%).
-The full loan comes from the account and all the money and interest get paid back into the account over 1-5 years. Early repayment is possible.
-The loan amount does not count as income for tax purposes, and the repayment is not tax deductible.
-The loan repayment is mandatory and comes with a forced payroll deduction.
-It is better to get money into the markets early to get it working for you.
I am looking at taking a $10,000 loan from my TSP, repayable over 3 years, total expense to me in the end is $10,243 + $50 ($284.56/mo). I will then invest this into the taxable market, without costing me very much every month to repay the loan. The low cost of repayment means I can keep pumping a large amount of cash into my taxable investments. Then rinse and repeat, as long as the market appears to be up. (Not market timing, but not going to pull money out after a large dip... at least not until a minimum level is restored.)
Notes:
-I understand this will hurt the growth of my TSP, but it will increase the growth of my taxable.
-If the market takes off, my TSP looses value, but my taxable gains even more value. If the market crashes, my TSP gains value, as my repayments are worth more, and I still shifted a portion to my taxable to help out there.
-I understand my taxable investments will not grow as fast as my TSP due to taxes owed, but I can use it for an income stream before the age of 60.
-I have not contributed to my TSP in over a year as all of my excess money flows to my taxable with a little here and there to the Roth.
-For the rinse and repeat, the $10,000 was replaced. $40,000 was left to grow as I do not want to cripple its possibilities. It is possible to take a loan up to 50% of the vested value or $50,000 whichever is smaller ($25,000 for me). Maybe if it gets larger, I will consider a larger amount (Other than what is listed below).
-Random Idea Addition: If it is a workable idea, maybe increase the loan to $15,000 and put $5,000 into the Roth for the year... and call it a forced Roth contribution... $5,000 into the Roth now and re-payed over 3 years. At the least I am considering the idea (for the $5,000 to Roth loan) as a possible way to benefit myself, as I did not max my Roth last year due to similar reasons for not contributing to the TSP. Max the year for me now, payable over a 2 year time frame... or 3 with the other plan. So I still have access to the initial money if needed (Last Resort Emergency Fund) but it grows tax free.
From what I can see, the plan relies on my investments to produce and my self control, to not spend the massive pile of cash on something stupid before retirement. I am a spender by nature. And I am spending my money buying "income" for the future. As long as I make it my goal track the income and not the total value, my mindset is comfortable. Hell, I have made it a game to see just how much I can manage to "spend" on my future, hence the crazy idea...
I should be able to add another $20,000 to my taxable investments this year and with the additional $10,000 from the loan I can make that $30,000...
I would like some feed back to see if my idea sounds reasonable, or did I just lose another screw? Thank you.
~Dy'Ness
PS: I understand the Managed Payout Funds are not very popular due to how they operate, but they fit my bill of incorporating indexing with a set amount payed out every month (Adjusted every year based on the rolling 3 year average price). Maybe one day, now that I have signed up for an account, I will list out why I choose this fund along with why I believe it is a good one, for me at least.
I have been a lurker on this forum for a year and change now and finally had an idea I needed to vet and I think this would be the most appropriate place.
Ok, a little about me and my situation. Sorry for the long read.
Age: 27
Active Duty US Marine Corps
Financial Situation:
TSP: $50,000 (L-2050)
Vanguard:
-Roth IRA: $10,000 (Wellington)
-Taxable: $48,000 (Managed Payout Growth + Distribution, all distributions are re-invested automatically.)
Growing up I knew you had to work until you were 60-65 before you could retire. It wasnt until a few years ago I found MMM and then found this forum and bogleheads.org and learned that it was possible to retire early without winning the lottery.
I became a dividend investor and have been working to build up a passive inflow to supplement and to hopefully replace my income, especially considering I am looking at retiring from the military.
The problem: I cannot touch my TSP until I am 60, and I would like to retire before 45 (Adjustable, but an aggressive goal gives me something to strive for). This goal fits and I am on track to make it happen, assuming inflation and the markets want to work with me.
Crazy Idea that needs an outside opinion:
-The TSP offers General Purpose loans at a ridiculous interest rate (1.5%).
-The full loan comes from the account and all the money and interest get paid back into the account over 1-5 years. Early repayment is possible.
-The loan amount does not count as income for tax purposes, and the repayment is not tax deductible.
-The loan repayment is mandatory and comes with a forced payroll deduction.
-It is better to get money into the markets early to get it working for you.
I am looking at taking a $10,000 loan from my TSP, repayable over 3 years, total expense to me in the end is $10,243 + $50 ($284.56/mo). I will then invest this into the taxable market, without costing me very much every month to repay the loan. The low cost of repayment means I can keep pumping a large amount of cash into my taxable investments. Then rinse and repeat, as long as the market appears to be up. (Not market timing, but not going to pull money out after a large dip... at least not until a minimum level is restored.)
Notes:
-I understand this will hurt the growth of my TSP, but it will increase the growth of my taxable.
-If the market takes off, my TSP looses value, but my taxable gains even more value. If the market crashes, my TSP gains value, as my repayments are worth more, and I still shifted a portion to my taxable to help out there.
-I understand my taxable investments will not grow as fast as my TSP due to taxes owed, but I can use it for an income stream before the age of 60.
-I have not contributed to my TSP in over a year as all of my excess money flows to my taxable with a little here and there to the Roth.
-For the rinse and repeat, the $10,000 was replaced. $40,000 was left to grow as I do not want to cripple its possibilities. It is possible to take a loan up to 50% of the vested value or $50,000 whichever is smaller ($25,000 for me). Maybe if it gets larger, I will consider a larger amount (Other than what is listed below).
-Random Idea Addition: If it is a workable idea, maybe increase the loan to $15,000 and put $5,000 into the Roth for the year... and call it a forced Roth contribution... $5,000 into the Roth now and re-payed over 3 years. At the least I am considering the idea (for the $5,000 to Roth loan) as a possible way to benefit myself, as I did not max my Roth last year due to similar reasons for not contributing to the TSP. Max the year for me now, payable over a 2 year time frame... or 3 with the other plan. So I still have access to the initial money if needed (Last Resort Emergency Fund) but it grows tax free.
From what I can see, the plan relies on my investments to produce and my self control, to not spend the massive pile of cash on something stupid before retirement. I am a spender by nature. And I am spending my money buying "income" for the future. As long as I make it my goal track the income and not the total value, my mindset is comfortable. Hell, I have made it a game to see just how much I can manage to "spend" on my future, hence the crazy idea...
I should be able to add another $20,000 to my taxable investments this year and with the additional $10,000 from the loan I can make that $30,000...
I would like some feed back to see if my idea sounds reasonable, or did I just lose another screw? Thank you.
~Dy'Ness
PS: I understand the Managed Payout Funds are not very popular due to how they operate, but they fit my bill of incorporating indexing with a set amount payed out every month (Adjusted every year based on the rolling 3 year average price). Maybe one day, now that I have signed up for an account, I will list out why I choose this fund along with why I believe it is a good one, for me at least.
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