[TSP traditional to roth] GS-7 what to do with $8,000 from first year of TSP contributions

[matt_hil]

@tr1n1ty 10% APR on a 15-yr, $14000 loan amount. if i pay the minimum, i’ll be paying as much in interest as the actual loan itself!!

 

[tr1n1ty]

@matt_hil Yeah, at 10%, it’s probably worth it to pay off now. It’s always about comparing opportunity cost though.

Say If you had an opportunity that paid 11% for 30 years or for your life. Then you logically would want to invest into that with your extra cash instead of your 10% for 15 years.

This is why paying down your mortgage for most people is actually a bad idea (lots of 3% loans)

Don’t let debt drive you away from investing if you can. But I agree here, the math makes sense. You have a return of 10% on this investment, that’s pretty good.

 

[kitty346]

@matt_hil Is the TSP amount from your current job or previous military service? If you’re still employed by the federal government and under 59.5, the only way to withdraw from the TSP is if you have a hardship that meets the IRS’s guidelines. If you do, that money cannot be rolled into another retirement account.

Just leave the traditional money and start contributing to the Roth now. There’s nothing you can do about the past contributions now and there’s no downside to switching if it makes sense for your taxes now.

Also, with that rate on your student loans, I works only contribute enough to your TSP to get the match if you’re eligible and use the rest to pay that off.

 

[tlotw]

@matt_hil Roth and traditional are just the way the IRS see’s the account and how it is taxable. C & S funds are the investment. They are good, i invest in those two for me and my spouse. Leave your money in your TSP, You can do a traditional to Roth conversion if you want. There is not enough informative to know if that is best. People new to investing often get caught up on Roth and traditional, which is only how the account is taxed, and not on the investments and the plan.

Usually Roth is better for people than traditional, but that depends on circumstances. Non-profit is only a designation to the IRS as well, it doesn’t mean that for profit companies also give back to communities or to charities. Focus more on your plan than how the IRS see’s it. You will know when it’s time to adjust your plan to make it more tax friendly. At first taxes don’t make a huge difference but once you start really building up savings and investments taxes make a big difference and tax sheltering your savings matters.