Roth IRA

5. If you're able to fund any type of investment account in January ...fully for the year...the compunding will be larger vs. funding over the 12 months. Compounding for many years is the key to building wealth.
6. For most younger persons, investing in 100% equities will provide better results over the long term. So for most, its is better to keep a large percent of the investment in equities. A simple broad low cost cap weighted index fund such as VTI or similar. As one gets older (closer to retirement, adding fixed income (a bond fund) is usually recommended.

These guys know what the are talking about: https://militarymoneymanual.com/podcast/
 
Wave2016 said:
May I know what company you open a ROTH IRA? When you say minor, is it because your DS is less than 18? I would like to start mine as well but have no idea. Any ideas is appreciated.
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I opened the minor ROTH IRA for my son under my account on Vanguard because he is only 16. I help him manage it and will give it back to him when he turns 18.
 
NPFAM said:
I opened the minor ROTH IRA for my son under my account on Vanguard because he is only 16. I help him manage it and will give it back to him when he turns 18.
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Thats great. Look at this graph: see how powerful a few years can be. FYI: I have no connection with any of these firms.
 

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Don't Give Up the Ship said:
5. If you're able to fund any type of investment account in January ...fully for the year...the compunding will be larger vs. funding over the 12 months. Compounding for many years is the key to building wealth.
6. For most younger persons, investing in 100% equities will provide better results over the long term. So for most, its is better to keep a large percent of the investment in equities. A simple broad low cost cap weighted index fund such as VTI or similar. As one gets older (closer to retirement, adding fixed income (a bond fund) is usually recommended.

These guys know what the are talking about: https://militarymoneymanual.com/podcast/
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Thank you for your explanation! I didn't think about the factor of compounding!!! Sometimes I worry if I fund $7000 in January and buy them at the peak, instead of funding over the 12 months, with different prices.....
 
Remember you can still make contributions for 2024 until Apr 15. Of course the income rules would still apply.
 
NPFAM said:
Thank you for your explanation! I didn't think about the factor of compounding!!! Sometimes I worry if I fund $7000 in January and buy them at the peak, instead of funding over the 12 months, with different prices.....
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Don't worry about that. Studies show that most of the time (65% if I recall), buying in a lump sum provides the better result. It wont matter over the 40+ years that this retirement $ will be invested. Just fund it and forget it. When the market crashes...just dont sell. It will come back. Selling will lock in the loss.
 
Don't Give Up the Ship said:
Don't worry about that. Studies show that most of the time (65% if I recall), buying in a lump sum provides the better result. It wont matter over the 40+ years that this retirement $ will be invested. Just fund it and forget it. When the market crashes...just dont sell. It will come back. Selling will lock in the loss.
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Yes, I have to remember, and tell my son, NOT to sell....I kind of learned my own lesson in 2020....:rolleyes:
 
Roth IRA is the best idea of Cadets, since they can't participate in TSP yet.

We helped DD contribute to her Roth along with her Cadet pay. DH and I were self employed and the girls worked for us since they were little, then became our office notaries as soon as they turned 18. Many years of Roth contributions.

As soon as she could start the (Roth) TSP mid-year after graduation, DD selected the max available for the remainder of 2024, then reduced to just under half her 2LT pay. C/S/I funds. I tell her she has the Golden G fund in the future, what a unicorn, would love to have some of that G fund as part of my fixed income portfolio!

Good savings habits are important to establish at the beginning. They won't miss the deductions from pay but they add up over time.

Make sure you/your CPA keep track of the contributions and conversions to Roth.
 
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HCopter said:
Roth IRA is the best idea of Cadets, since they can't participate in TSP yet.

We helped DD contribute to her Roth along with her Cadet pay. DH and I were self employed and the girls worked for us since they were little, then became our office notaries as soon as they turned 18. Many years of Roth contributions.

As soon as she could start the (Roth) TSP mid-year after graduation, DD selected the max available for the remainder of 2024, then reduced to just under half her 2LT pay. C/S/I funds. I tell her she has the Golden G fund in the future, what a unicorn, would love to have some of that G fund as part of my fixed income portfolio!

Good savings habits are important to establish at the beginning. They won't miss the deductions from pay but they add up over time.

Make sure you/your CPA keep track of the contributions and conversions to Roth.
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That is a formula for success in Retirement. Most people, and "Financial Advisors", have no idea. From a Navy Guy, I say Bravo Zulu.
 
AA787DRIVER said:
My kid gets less than 15k at USAFA, but I have been gifting him the Roth IRA amount since he started making income in HS. Great way to start saving. No TSP till they get commissioned.
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I was wondering about TSP. Too bad they can start earlier. Thanks for the knowledge nugget!!
 
NPFAM said:
Thank you for your explanation! I didn't think about the factor of compounding!!! Sometimes I worry if I fund $7000 in January and buy them at the peak, instead of funding over the 12 months, with different prices.....
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Don't worry about that...studies indicate to fund the full amount as early as possible will provide the best results over time. This is because the market goes up more than it goes down (long term slope about +10%). What happens is volatility and reversion to the mean as the market climbs over the long period. Put the $ to work ...
 
Time in the market, not timing the market.
It is hard to stay the course because the long term is made up of a lot of short terms.
Using a simple spreadsheet, you can show your Cadet how "easy" it is to become a millionaire.

Columns for DD are checking, savings, IBonds, taxable brokerage, TSP, Roth IRA. Use cell formulas at the top for % return (by category) and annual contribution, and play around with those numbers. Rows are each year.
 
Lots of good information and advice above. I'd also add that as you select where to invest, be cognizant of fees/expenses. For example, the OER between ETFs vs. Mutual Funds can be significant especially over the course of decades.
 
Sealion II said:
Lots of good information and advice above. I'd also add that as you select where to invest, be cognizant of fees/expenses. For example, the OER between ETFs vs. Mutual Funds can be significant especially over the course of decades.
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How much is too much. Ans. 0.5% (ER plus other fees max.). Thats my view. My investments have a weighted expense of 5 basis points. In investing: 1. Money Doesn't Grow on Fees, 2. You don't get what you pay for.
 
Perhaps the wrong thread, but all '23 SA officers are now O-2s and have agency matching in TSP. Make sure you are not maxing TSP before December. You only get 5% match when you contribute. That is, if you hit $23,500 before December you lose out on ~$260/month
 
Skipper07 said:
Perhaps the wrong thread, but all '23 SA officers are now O-2s and have agency matching in TSP. Make sure you are not maxing TSP before December. You only get 5% match when you contribute. That is, if you hit $23,500 before December you lose out on ~$260/month
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Good tip. That was something I had to manage every FY in the corporate world.
 
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