- Joined
- Mar 14, 2014
- Messages
- 6,848
Go,
Please forgive mydimwittedness.
If the income while deployed is not taxable, does it make sense to contribute to TSP in the first two years when there is no match? Does the tax-deferred compounding of gains make it worthwhile?
Thanks in advance for plying your trade here for free. I'd be happy to advise you on soybean production prospects for Northern/Central Brazil.
Great question, CB. My opinion is yes. The TSP still allows for long term compounding and more importantly it is comprised of very low cost investment choices. So even if there is no match, you are not likely going to find lower expense ratios than what is found in the Government TSP program. It is like shopping at Costco for groceries versus getting them at the "kwikie mart" The expenses and/or sales commissions of other investment brokerages will usually be much higher and put you further behind to start.
The ratio of Roth vs pre-tax needs to be decided by the specific tax situation and time horizon to retirement. Generally speaking (and that's all I can do here on this forum), a split is a way to play it safe. This is because we all don't really know what our tax situation will be in retirement. Nonetheless, the younger you are, the more likely you are to benefit from the Roth component.