Sailor saving up for retirement with TSP

[marvelloustime]

I'm a single, 30-year old, enlisted E-4, stationed in Japan. Been in since 2014 and contract is up in 2020. I'm not sure if I want to stay in for a full 20, do longer, or get out after my 6 is up. I'm currently on the fence. Although, I would like to retire as early as possible, without working, so that I may enjoy a simple life once I get out. I'm not a fancy cars/big house type of guy and I don't plan on marrying or having kids.

What steps can I begin taking to accrue the largest savings for retirement? And what resources/sites should I seek to further my knowledge of my financial future?

Here is more information on my situation if it helps to give context:

-$2,000 in checking acct.

-B.A. in psychology, prior to service (may go officer)

-Student loan debt of $20,000

-2 Credit Cards, 0 debt

-Plan on opening Vanguard account in near future

-TSP total is at $11,000

-TSP contributions to Roth option 50% of all pay (overseas, etc. included)

-TSP distribution C-30% I-30% S-30%

-No car, or other assets

-Considering light investing in Bitcoin

 

[katan]

@marvelloustime Time in the market beats timing the market. Common advice that you will hear. If you want to accrue the largest savings for retirement continue your contributions to the TSP, and try to max it (18k) every year. After you max your TSP, start contributing to an IRA (5.5k max) every year. If you want retirement savings, this is the way to go. After you max these vehicles, then you can start thinking about messing around with bitcoin.

You didn't mention the interest rate on your student loans, if its greater than 4% it would behoove you to pay that down fast. Its basically reducing all returns from your TSP by its interest rate (neglecting tax benefits of course).

If you do want to do "light investing" in bitcoin. I would save it for after the student loans, and then only do a certain % of your investments in taxable accounts. You get a big return? Reallocate your assets (sell off and invest in boring index funds) to keep your % the same. However, these will almost certainly be in taxable accounts so you have to consider the capital gains taxes involved (long term or short term).

For resources, I really enjoyed checking the related subreddits (on the sidebar) in r/personafinance, some of them are pretty interesting, others worth more than others, but does have a wealth of information in there.

 

[anniereborn]

@marvelloustime First, congrats on having such a high savings rate. 50% is impressive.
If I were in your shoes I would lower my contributions to TSP for the time being and start throwing money at my student loan debt. Since you had the debt before you got in, you might be able to reduce the interest rate with the SCRA. Your debt is an absolute emergency because any returns you are seeing on your TSP are being negated by the interest rates of your loan.

I wouldn't open a Vanguard account until you have maxed your TSP contributions for 2017 ($18,000). Which at 50% shouldn't be hard to do. Once again, AFTER you have paid off your student loans. Once debt is paid off and you have maxed your TSP contributions for the year, then open a Vanguard IRA and max that ($5,500). Then, if you have any left over, open a taxable account and basically use it as a saving's account.

Don't forget to have an emergency fund to cover immediate unforeseen expenses. That amount can be whatever you want it to be, but for a single E-4 with no kids it shouldn't be much. For comparison, I'm a married E-5, no kids, 2 paid-off cars, and I don't keep more than $5,000 in my emergency fund. And that's only because I'm overseas and might need to book an emergency flight home one day for myself and my wife. Even then, I would use my credit card to purchase the tickets then immediately pay it off with my emergency fund.

So to recap...
-Build a small emergency fund (maybe only $2-3k for you).
-Stop contributing so much to TSP right now and use that money to pay down your debt as fast as possible. (I suggest reading Military Money Manual and how he paid off over $100k in student loans).
-Once loans are paid off.. Go back to contributing to TSP until it is maxed.
-Once TSP is maxed, open a Vanguard IRA and contribute the max to that.
-Once IRA is maxed, open a Vanguard taxable account and contribute as much as you can.
-Once you've done all that, then maybe you can "gamble" in Bitcoin or whatever the other guy suggested.

Good luck.

 

[chiliman]

@anniereborn

If I were in your shoes I would lower my contributions to TSP for the time being and start throwing money at my student loan debt.

This. That student loan debt is a land mine in the middle of your financial plan. Get rid of that thing. OP didn't say what the interest rate was, but given the very low interest rates for savings and investments, there is essentially zero chance that you are going to get anywhere near the risk adjusted return you do by paying down that debt.