Thrift Savings Plan (TSP) Q&A

[BashiChuni]

37 minutes ago, Danger41 said:

How does the TSP work when you switch from AD to the Reserves/ANG? Smooth transition (doubtful) or painful government paperwork drill?

smoother than a babies butt

[whiskeychevelle]

Apparently mypay reset all of our contributions to the TSP to 0% sometime this month. Confirmed with multiple guys in the office this am. Check your contributions... 

[LiquidSky]

Quite bad for those on the new brs.

 

Similar note contributions didn't auto-stop at the limit of $20,500 like they're supposed to. Second year running dfas has overcontributed on my behalf.

[Standby]

5 minutes ago, LiquidSky said:

Quite bad for those on the new brs.

 

Similar note contributions didn't auto-stop at the limit of $20,500 like they're supposed to. Second year running dfas has overcontributed on my behalf.

What was the recourse for this “problem?”

[nunya]

6 minutes ago, Standby said:

What was the recourse for this “problem?”

https://www.military.com/money/personal-finance/thrift-savings-plan-tsp/you-may-have-contributed-too-much-your-tsp-2021.html

[pawnman]

10 minutes ago, Standby said:

What was the recourse for this “problem?”

Contributions came out of the Nov 1 paycheck as per usual. Get it updated and they'll come out on Dec 1st too.

[nsplayr]

I had the issue last year where DFAS didn’t stop my contributions when I got the max in the fall, but TSP (wisely) stopped accepting them. Created a debt that Uncle Sugar owed me. Despite numerous emails and phone calls it didn’t get resolved until April when I basically had to stand on someone’s desk at finance to get them to give me my MFing money back 😡

Good luck to all, it’s a BS system that finance runs and they play a poor hand badly on top of it all. 

[ThreeHoler]

It is a display error only


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[herkbier]

2 hours ago, ThreeHoler said:

It is a display error only


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Which issue? Contributions to zero or the ability to over contribute?

[LiquidSky]

12 hours ago, herkbier said:

Which issue? Contributions to zero or the ability to over contribute?

The former but I'd still login and verify. The latter is a legit error that occurred last year too and they still haven't fixed. 

Edited October 29, 2022 by LiquidSky

[ThreeHoler]

Which issue? Contributions to zero or the ability to over contribute?

Contributions zero.

[di1630]

When you guys max out the 22.5k limit on TSP, where do look to put the money next?


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[herkbier]

Traditional or Roth IRA. After tax 401k. 

[FDNYOldGuy]

+1 on the IRAs (especially Roth), but keep an eye on income limits and you might need to do the “Backdoor Roth” option if you make too much.

TSP is treated like a 401k and, if you max out TSP, you’re already maxed on 401k; pre or post (Roth) designations. If you have access to 457 you can end around that limit and contribute another $22.5.

If you’re looking for more tax shielded investment options beyond that, next stop can be HSAs, or if you’ve got kids you think will need college tuition help, 529s.

If your focus is giving money to heirs, it might be worth looking into a Whole Life insurance policy. These are EXPENSIVE and not really great investment options (fees are high and annual returns aren’t even close to market returns you’d get investing elsewhere), so they’re not worth looking into until you’ve checked quite a few other investment boxes first. But they’re useful ways to ensure your heirs get paid a tax free chunk when you eventually die (Father Time is undefeated, after all) and you can get tax free dividends in your later years, if you choose, or keep the value growing by reinvesting the dividends.

You have to be careful talking to folks about these, as they (and their similar Variable/Universal/whatever Life compatriots) are pushed big time by lots of financial advisors and insurance salespeople because they have HUGE commissions relative to other investment options/life insurance policies. They have a vested interest to hawk them to you, so just do your homework and use someone you trust to buy one, if you go that route.

Edited October 30, 2023 by FDNYOldGuy
Grammar

[CaptainMorgan]

If TSP is treated like a 401k for contribution purposes, would maxing in it the year I retire have negative implications for my company contributions at an airline?


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[HossHarris]

49 minutes ago, CaptainMorgan said:

If TSP is treated like a 401k for contribution purposes, would maxing in it the year I retire have negative implications for my company contributions at an airline?


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Depends on the airline.
 

At delta, once you hit the limit 401k DC (company contributions) are paid to you as cash or now they go into a different fund (MBCBP). 
 

at other airlines, when you hit the company contribution limit, the money stops. 

Edited October 31, 2023 by HossHarris

[nsplayr]

20 hours ago, FDNYOldGuy said:

If your focus is giving money to heirs, it might be worth looking into a Whole Life insurance policy. These are EXPENSIVE and not really great investment options (fees are high and annual returns aren’t even close to market returns you’d get investing elsewhere), so they’re not worth looking into until you’ve checked quite a few other investment boxes first. But they’re useful ways to ensure your heirs get paid a tax free chunk when you eventually die (Father Time is undefeated, after all) and you can get tax free dividends in your later years, if you choose, or keep the value growing by reinvesting the dividends.

You have to be careful talking to folks about these, as they (and their similar Variable/Universal/whatever Life compatriots) are pushed big time by lots of financial advisors and insurance salespeople because they have HUGE commissions relative to other investment options/life insurance policies. They have a vested interest to hawk them to you, so just do your homework and use someone you trust to buy one, if you go that route.

YMMV of course, but I would not recommend a whole life insurance policy to nearly anyone.

In terms of leaving money to heirs, is it going to be more than $12.92 million? If so, congrats, you have won at life. Or maybe not, IDK...personally I would spend more while I'm alive and not leave as much to my kids after I'm dead, but you can do what you'd like. If you're going to leave less than $12.92m, whole life shouldn't even be in the conversation.

Almost regardless of your net worth, IMHO I'd rather just get market returns and pay long-term capital gains taxes in a regular-ass brokerage account vs suffer from below-market returns in a whole life insurance vehicle with a lot of added complexity & fees.

BL: whole life insurance is really only a good deal if you sell whole life insurance.

[FDNYOldGuy]

13 hours ago, nsplayr said:

YMMV of course, but I would not recommend a whole life insurance policy to nearly anyone.

Hence why I overly stressed that it's a bad investment and multiple other investment/financial planning boxes should be checked, but discounting the option completely isn't the answer and I'm guessing why you put "nearly" in there. 

13 hours ago, nsplayr said:

In terms of leaving money to heirs, is it going to be more than $12.92 million? If so, congrats, you have won at life. Or maybe not, IDK...personally I would spend more while I'm alive and not leave as much to my kids after I'm dead, but you can do what you'd like. If you're going to leave less than $12.92m, whole life shouldn't even be in the conversation.

Almost regardless of your net worth, IMHO I'd rather just get market returns and pay long-term capital gains taxes in a regular-ass brokerage account vs suffer from below-market returns in a whole life insurance vehicle with a lot of added complexity & fees.

I also mentioned the lower returns/better options in other investments. And, yes, most of us likely won't be lucky enough to be above the $12.92 tax free cap, so no (or little; some states have) estate taxes. But, your heirs will have to pay taxes on what they receive. All inherited retirement accounts must be wiped out within 10 years of your passing, so you kids will be forced to liquidate everything within that timeframe and pay taxes on (any non-Roth parts of) it. It'll also count as income that'll stack on top of whatever they're already earning. 

There are no taxes at all on insurance disbursements. 100% a Term is a cheaper buy, but you die outside that term and they get nothing. A Whole LIFE is way more costly for lower coverage, but it's a GUARANTEE that someone gets a wad of cash. Father Time is undefeated, so you're getting paid to die. 

It's also something stable you can 100% bank on paying out what it says it's going to. If you keel and 08-09 type market is around, your estate has taken quite the hair cut. You know what still paid out 100% in March 2009? Insurance. 

For folks living that airline life, you're already socking quite a bit away in stonks, which is why I threw the option out there (with a million caveats). Again, I don't think it's a great investment and they are very costly, but it's another estate planning tool that can have some validity for folks making a lot of money and checking other retirement/investment boxes. I make zero dollars by bringing up Whole Life and you will certainly have the wolves salivating when you ask any company about them due to the high commissions, but it can be worth a consideration if you know what you're going into.

15 hours ago, CaptainMorgan said:

If TSP is treated like a 401k for contribution purposes, would maxing in it the year I retire have negative implications for my company contributions at an airline?


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It could. The company will still contribute, but you'll just be unable to write anything beyond the $22.5 off your income and if you think you'd max out their direct contributions, too, then you might end up overfunding beyond the $66k allowed for TSP/401/403 plan type. Not really a tax person, but this is what comes to mind.