I see the flowchart and also many other people say to put at least 5% into TSP and the rest it into a Roth IRA, but wouldn’t it make more send to throw everything I can into the TSP and forget about using a Roth IRA?
The reason I say this is because the more money I have in one place the more compounding it will do right?
Should I put all contributions into my TSP or split it into my TSP and then Roth IRA?
byu/mdafidel1 inMilitaryFinance
Posted by mdafidel1
4 Comments
Try out the assumption you make in your last sentence. Go spends 30 seconds actually using a calculator and report back.
No, that’s not how math works. 10% of $100 is $10. If you have two accounts with $50 each both making 10%, that’s still $10 between the accounts.
Most people put them together to make it simpler to track. The difference is pre and post tax, it will feel like you “make” more when you put it all pretax because you are lowering your taxes right now each paycheck. People do post tax because when they’re old they don’t want to pay taxes when they withdraw. You should really do a healthy mix of both.
Follow the “start here” the bot linked for you.
BL: 5% min to your TSP, then max out your IRA until, and if those combined don’t meet at least 15% of your gross income, more to your TSP.
It’s not a bad plan but for different reasons than you stated. Just doing the TSP and skipping the IRA is easier and probably won’t make a difference.
The compounding thing doesn’t matter because whether you have a thousand dollars in a thousand accounts or a thousand dollars in one account, they all compound the same (assuming the same return rate)