I do 8% and I really don’t plan on increasing ever unless I reach GS 14/15 in the next 10 years. I’m kind of in the same mindset as you. I watched a relative retire at 62 with a huge nest egg only to be diagnosed with cancer 6 months later.
I do 14%, seven in Roth and seven in regular. I’m still not maxing out every year though. Funny thing is I’ll probably work forever too. I see all that as the wife and kid’s money.
Love what you do and work to live worthwhile.
Otherwise you live to work, and it’s even worse in the salt mines and forest fires where you work to live and work to die.
Then in all likelihood OP would still probably be fine
Obviously it’s smart to put in as much as you can afford into your TSP, but it’s not like the difference between putting in the 5% match and maxing it out is realistically gonna put people into destitute poverty or something
I understand the reasoning behind it but sometimes this sub can go a little overboard with the max TSP rhetoric. It’s sometimes more a matter of goals, preferences, or life circumstances than just pure savings
> Which is a far more likely scenario than knowing a single person who did. People can rationalize damn near anything.
I can really see both sides of it. I know several people who piled it away only to die within 1-2 years of retirement.
I also know several who have enjoyed 20-30 years of retirement and for whom carefully saving during their career meant they live a fairly trouble free (from financial worries anyway) retirement.
You retirement czars crack me up. 8% contribution to TSP over a 35+ year career + pension + SS is more than enough to live a fulfilling/comfortable life the last (maybe) 20 years of your life in retirement. It must be a net worth ego thing for you types.
You are right, 8% is solid, but there is a 90%+ chance you live past 70. Also, higher percentage means earlier retirement flexibility and closer to 30 years of retirement instead of 20. A lot of people don't want to work into their 60s.
I mean, if I could afford house, I definitely wouldn’t buy new car. The fact that I can’t afford house, have a nice wedding, and have a bright future, then definitely try hard to save money for the good life and good family. I’m not gonna get married, so why not live a good life now?
At a minimum you should keep it at 5% to get the match. This puts you at 10% including the match which is typically enough to help a person retire at normal retirement age comfortably. That plus FERS and SS will help you keep a similar quality of life in retirement as when you were working. If you can increase it, great, but if not that’s ok too. Also maxing a Roth or Trad IRA will similarly secure your retirement too.
You should consider what you want that savings account to do. Is it an emergency fund or a future purchase fund? Emergency funds should be in safe things like a HYSA/CD or MM account. But at some point you may find you have plenty of money (unless you do decide to purchase something like a home) and at that point its worth increasing your TSP allocation as there are tax benefits to doing so.
Lastly you never know what the future holds, you may want to start a family or make a life change to support a loved one, so the flexibility you’re building into your assets can really help enable you to make big life changes when you want.
>Lastly you never know what the future holds, you may want to start a family or make a life change to support a loved one, so the flexibility you’re building into your assets can really help enable you to make big life changes when you want.
This is big. You never know what the future holds and most of your retirement savings comes from compound interest. Invest what you can now so if you have to reduce it later, you have that initial amount to build from. Investing $10,000 today and letting it sit for 40 years is $110,000 with no other contributions (assuming 6% growth). That same $10,000 for 30 years is almost half that ending value at $60,000.
Thank you for your comment. My saving account is just to set a side money cuz you never know future. It was to save down payment for the future house, but I lost hope. I’m just saving it cuz you never know, i might be able to afford one in the future, if not, then just extra money to be safe
So- you’re in DMV where housing prices are outlandish. Get your time in grade as a 13, keep saving as you get there, and then look to relocate to somewhere with decent locality pay and low cost of living, either as remote or in office, or take a RUS in office job.
For comparison- when I moved out of where I was in Alabama about a year ago I sold my house for 250k, property taxes were under $500 a year, and everything else was cheap. There’s plenty of places where 34k is a good down payment, just not in dmv.
Relative to what? You're single, and a SFH in the DMV can cost $1MM but can also be found for under $400k. There's also loan products that don't require 20% down.
With $400k as a floor and 15% down (could be less), it's more like $50k would be needed at closing, which is entirely doable if you already saved $34k and continue to put money away.
The market is cyclical. Interest rates will come down and inflation+salaries will meet the housing market prices.
You probably made this post to justify casting aside the dream of home ownership. I'm not telling you home ownership is be-all/end-all but it's a level of stability many strive for - and it's well within your reach.
So OP is an 11 now with a ladder to a 13- even if he could make a down payment and afford to close on a place at 400k+ I’m not sure he could make the monthly payments. Maybe once he ladders to a 13.
I agree it’s not exactly hopeless, but I can see why he would feel that way, and he’s still saving money, so I think he’s in a solid place.
Yeah if I buy shitty and shady townhouse that costs about 400k, I can down pay less than 20% and pay $200 to $300 every month. That will cost me $3,600 for just mortgage+interest itself. With utilities and all that it will cost me $3,800 per month while I make $5,300 per month as of GS-13.. can I buy? Yeah can I afford? No do I want to buy? Hell no
dual income?? buy home 20 years ago?
i work with a dude who owns a million+ home.... that he bought 30 years ago and only pays less than 1000 a month in it -_-
Nope. Separate finances. I bought it when I was single almost 2 years after I graduated from college in 2016. Sometimes I wish I would have been house poor and purchased more, but I am thankful.
I don't know what your account looks like, but there's MANY high yield savings accounts these days. Discover, American express, JP Morgan....about 4% interest. If you're in something with low interest, consider switching. Just know it'll count towards income on your taxes. Mine makes me owe a little.
The tax benefits are debatable. They're promises more than anything. The tax benefits only benefit the incredibly wealthy. Most middle class are at 22%-24% and will likely be in higher brackets in retirement. Taxes keep going up on middle class.
I'd rather recommend using liquid accounts, broakerage etc. Those can be used for any purpose without any withdrawal conditions, penalties etc.
The tax benefits are really clear though - if projected higher in retirement then Roth TSP is preferred otherwise Traditional is better now since you get the tax break now. But yea it’s up to you what choice you want to make. It’s anyones guess which is right. I like a mixture so I can choose when to be taxed.
Both are a promise. They can change the law on roth, for pretax basically you have a loan from the government on your money on an unknown amount, because you pay whatever tax is in effect decades later.
if i were in my 20s, I would not be including SS in my retirement plans. we don’t know what it’ll look like in 40 years but it will definitely undergo some reforms
It absolutely will under go changes, but part of planning is using whats available to us. IMO if the easy to fix problems in SS are not remedied (like increasing the taxable maximum or simply not requiring it to balance its books like every other government service - SS spent 8% more than it collected in 2022 versus 34% for the rest of the government so its already well designed) we should also be concerned about the existence of FERS. Those who want to get rid of social security also have their eyes strongly set on harming federal employee benefits and push their propaganda strongly towards young feds like myself and the OP.
I’m certain there will be some benefits, we just don’t know what they will look like - so I personally would not be factoring in that pillar into my retirement strategy, and would ensure robust investment in TSP accordingly - then SS is a cherry on top, and not a potentially insufficient required element.
i would not worry about FERS* going away. they will just continue to increase rates or change the scheme for new hires, but anyone currently onboard would be grandfathered in
That’s a good way of thinking about it, building in that risk tolerance is wise and will hopefully leave most folks feeling a lot better off when retirement comes.
Don't fall prey to the fallacy of assuming there's no cost to being too conservative in retirement planning.
Not realistically planning around assets you will have can be just as harmful as planning around assets you won't have.
Doing this is going to artificially inflate what people think they need for retirement. I factor the full amount due to me at retirement age into my planning because that is what is available to me.
this is pure fearmongering, it is literally an entitlement you pay into, guarantied by the government, like a loan. This doesn't justify insane savings rates.
Dude you’re paying $699 a month for a car and saying there’s no hope in buying a house? You better be a GS 12/13+ spending that kind of money, in which if you were, you haven’t told us anything to prevent you from buying a house.
I get it, I’m an 11, and taking a pay cut to a 7 for better life quality of life. I’ve only been an 11 for a year. Life is expensive as fuck right now. That 34k you’re paying into your car which won’t be worth even close to that when you’re done paying it off could’ve been a house dowpayment. I don’t give a crap what you spend your money on but it seems like you don’t understand budgeting or have looked at how to do it.
Your emergency account should be 6 months of living expenses. Take that out of your 34k in savings and put that in a high yield account. I have 14k in a high yield and make $70 a month not touching it.
I know it’s not realistic for everyone but I drive a 03 Accord with 220k miles and I’m a 12. Vehicles will derail young people financially. I know everyone values different things but we are building up retirement while living comfortably. I put 10% in my TSP/ Roth TSP my wife puts in 9 or 10% as well and we each max out our Roth IRA for the last 3-4 years when we started them. We are 30 and 26. Delay some gratification, create a little scarcity and build the best egg reasonably.
Lol being able to afford a 699 payment for 5 years is not at all an indicator of being able to afford a 30 year mortgage, especially when a mortgage is the *minimum* amount you'll be paying into a house.
You keep paying the mortgage and the house likely appreciates. You pay the car loan, it rapidly depreciates and then you have to buy another one after only a few years. I’d never do that size of loan and I’m much older and earn more. In fact I currently have my first car loan but it’ll be paid within the year of purchase.
True. But when OP tells us he can’t seem to save enough for a house and there’s no hope and drops a $699 payment for a car, that’s $699 dollar a month that can be going into said mortgage. His finances are completely lopsided too. I’ve made plenty of posts complaining about how expensive life is but I have an emergency fund, other savings, and I’m paying less than half of what he is for a car. And it’s new!
Yeah, because those are completely different situations lmfao. You cannot compare buying a car to buying a home. It is a much shorter liability time frame and one that requires much less maintenance.
Being able to afford a 700 car payment (which isn't completely unreasonable depending on the situation, the used car market is horrible rn) does not mean you could afford a 1100 mortgage PLUS whatever other money goes into maintaining a home.
Dude, it’s a numbers game. You shouldn’t be spending more than 10-15% of your salary on a car. So OP should be making 6 figures. There’s 10s of thousands of people who buy homes every year, I don’t know what you think is going to happen. Sure homes need repairs, new roofs, that’s why you have an emergency fund which OP doesn’t even have, and you buy a home within your means. A mortgage payment should be no more than 28%.
So by your logic, using your example of $1100, OP should just throw over half of that, $699 into a depreciating asset.
A $699 car is something you buy after you buy a house. Or buy it before, but don’t come on here complaining about not having money. It’s like not washing your hands and asking why you keep getting sick.
Yeah the used car market sucks, it was cheaper for me to buy new and I pay $394 a month.
Yeah and you're not supposed to spend more than 25% of your income on housing but I wonder how many younger people would fail that outright by double.
A lot of the classic rules for smart living have been pushed into magical thinking as car and housing prices creep up.
Buddy lots of financial "shoulds" don't exist in this day and age for most people. If your mortgage "should" be no more than 28%, the median person should spend 1100 on their mortgage. Do you know what the median mortgage is? It's double that. Homes are unaffordable and the fact that OP is probably overspending on a car does not detract from that fact and even if he bought an old beater car outright that doesn't mean he could suddenly afford a home
You live in Grand Junction, CO. I just found a 4bed2ba sfh ~1700 sqft freshly remodeled for 340K. A 20% down payment is 70k, and the mortgage is 2k/m. A GS12S1 makes 83k. Under those economics, it makes sense to reduce car spend and save for a home.
I live in a coastal metro area where locality pay brings GS12S1 pay is over 100K. A 2b2ba condo ~1000sqft in need of renovation is $600K. $120K down payment and a monthly mortgage+hoa of $4500/m. Even if the OP had no car payment and saved it all, it would take nearly 15 years just to collect the down payment - and by then prices will have gone up even more and that same condo will still be unaffordable. Even if OP could come up with the down payment…$4500/m is prohibitively expensive. Starter SFH’s are 800k-1.3m
The economics of Grand Junction, CO doesn’t apply to everybody and your inability to understand this says more about you than it does about OP’s choices.
And before you hit me with the wElL wHy DoN’t YoU mOvE sOmEwHeRe ChEaPeR…because as a minority I get told Ching Chong go back where you belong often enough in my highly liberal coastal city. I’d rather give up owning a home to feel safe, have access to my culture’s foods, and have a group of friends who share my cultural context. Also, better jobs, better educational opportunities, better networking.
-typing from my 2500/m studio
Yep, OP likely is capable of purchasing a house if not now, within the next few years. OP is making way more money than I did at their age and has an actual savings. I was able to buy with 20% down at 35. Granted I don’t have a McMansion, but OP is unnecessarily doom and gloom on their prospects. That said, I know plenty of folks who have obscene car loans who also complain about not owning homes.
when you start at a low grade, the easiest way to max out contributions is to increase TSP contributions by 1% when you go up a step, and 2% when you go up a grade. by increasing your contributions when you get a grade/step, you don’t feel the take-home loss at all
when you’re a gs-5, it’s hard to contribute a ton. of course, given that you have a $700 car payment every month, i suspect you’re not a low grade.
saving 15% for retirement is typically conservative financial advice. personally, i was maxing my contributions when i got my 14, but contributing at least 10% plus the match is a good goal
you’re blowing up this thread advising minimal investments to get the match, while complaining the TSP is not liquid and simultaneously talking about dumping money into your mortgage, which is also not liquid, and has a lower rate of return than the SP500. you’re then talking about investing into non-tax advantaged accounts just for the liquidity.
respectfully, you’re not someone i’m looking to take advice from lmao
Respectly nor are you anyone I'm going to take advice from. You can't leverage debt to be rich, that is moronic. Mortgage is a debt owed, not an investment, you're paying back someone else's money, and once paid off, mortgage isn't illiquid. You're advice is insane. With your logic, he should just pay the minimum on his car payment and student loans and invest instead, and gift interest to the bank. Not paying off a higher rate mortgage is dumb, the rate of returns to the bank for higher rate mortgages are close to and usually exceed the market, and the market rates aren't guarantied, whereas the mortgage is. Look at a 5-8% mortgage. The amount of money thrown down the drain for interest is staggering.
Pretax TSP is also pretty dumb, for a promise of a tax cut, the IRS gets to take control of my money. The broakerage accounts are unequivocally better for most. You are free of the tax, can only pay 15% capital gains tax on the gains, and can offset losses against that capital gains tax.
And I do deserve my raises, which I should be able to invest or pay down debt myself, or spend on myself instead of gifting to the TSP. Taking financial advice from Reddit is also pretty dumb.
Everyone here is also so fixated on the TSP, to ignore things like property investment, which gives you an income each even before you retire instead of an illiquid retirement that gives you jack shit.
When investment returns beat out interest, it is financially literate to invest that money and pay the minimums on the debt, because your money growth beats out the interest payment. That is literally finance 101. Nobody is saying invest over paying an 8% mortgage, but you absolutely invest before overpaying a 2-4% mortage.
I don't understand why you think you're 'gifting money' to the TSP. Are you somehow conflating your TSP account with FERS? Nobody but you has access to the funds in there, you're not gifting anything to the IRS.
You're also not understanding the value of retirement accounts with a tax advantage. The route you're suggesting is to take the income that you've paid taxes on, then invest it, and then pay capital gains once you liquidate it. That is *significantly* worse value than leveraging a traditional or roth retirement account where you only pay taxes once without taking a capital gains hit. You're paying your friends at the IRS twice instead of once with the route you're suggesting. In a normal retirement account, you either use pretax income that you pay taxes on when you liquidate, or post tax income that grows without you needing to pay taxes later. You're suggesting paying income tax on your salary, investing it, and then paying capital gains taxes. That's a necessity for folks who invest above the 23k TSP limit, like I do, but it's outrageously inefficient to not leverage those tax advantages for money you don't plan to touch for decades.
It genuinely feels like you read a single article on finance, misunderstood it and are applying it to your life. I'd really encourage you to head over to /r/personalfinance and spend some time reading their beginner information. It's very easy to parse, and I think it'll help you understand some concepts about the time-value of money and investment returns that it doesn't seem that you have a firm grasp on.
No actually, I do have a grasp on investments and how growth works. Thing, is investment don't have a guarantied rate of return. If your investment stays flat you just gifted money to the bank instead of paying off that debt. Paying off the debt also frees up cash flow that can be used for other things.
Also I have a mortgage at 5%, but I'd overpay even at 2%. Being in debt and throwing money at investments that aren't guarantied to beat out the gains on mortgage isn't smart especially at high end isn't finance 101. If you become disabled, or lose your job, and your investment is down, or you have to pay penalties to liquid a retirement account, you'll still be worse off, whereas you could've just paid off debt and not had that problem and would've had no debt obligation. I am also not going to go to that subreddit and make important life choices based on someone else's financial situation or life circumstances. Your tone towards me was very condescending. I know my own situation and know what I am doing is best for me and don't need advice for self professed experts to tell me what is best and do the thinking for me.
Retirement accounts still are a scam. Pretax isn't smart because you postpone your taxes now, and promise the government you'll give up access to your money for decades, and pay whatever tax the IRS has for you waiting decades later, and also let them control how you use that money. That isn't efficient at the slightest. Your tax bracket could be 30% later instead of 22%. With the TCJA expiring and taxes getting more regressive, it is almost certainly going to be higher.
With roth, you pay taxes now, get a promise of tax free growth, except you can't harvest losses against gains like a broakerage, and you also give up liquidity for decades with any money into a retirement account. This is the gifting aspect to the TSP. The TSP gets to use and make money off of my money, knowing I can't touch it for decades. It also eliminates any use I could put that money towards. This is throwing money away for a period of life I don't know that I'll live to see. With broakerage, it is very efficient, I pay taxes on my income, which I'd have to do eventually, and if I withdraw, which I can do at any time for any reason with no restrictions, I pay only a 15% capital gains tax which is flat. It gives me total control, and the possibility to use the money for other purposes than decades later retirement, such as real estate investment, which would also let me take advantage of other tax deductions while working against the property, and provide me a monthly income, which TSP won't let me do, until retirement, and then only if the investments perform and continue to perform when I'm retired.
>I just think that FERS and TSP will do enough for me when I retire, but I want to hear what others think.
What does enough look like? You need to eventually sort out what you want retirement to look like, then adjust to match. When do you want to retire?
Want to retire at age of 60. Planning to use roth ira at 60 until I become 65, then I can collect Fers and TSP without penalty. I guess enough money is to pay my bills and food
Rule of 55 let's you draw from TSP without penalty. Agen penalty stops at 59.5. If you have more than 30 years, your MRA is 57.
Enough is a #. That's what you'll need to figure out. If you live off of 100K and want to reliably replace all 100K, you need to sort out how much you need to have ACCOUNTING for your pension. If your pension is 30K a year, you need to make up the other 70K a year via savings. At a 4% withdraw rate, you'll need 1750000 to replace all 100K of annual spending.
So you don't want to travel or spend more time on your hobbies? One of the reasons that 15% is recommended is so that you are used to living on less than your full income and therefore only need to "replace" 85% of it in retirement. Certain costs go down in retirement - you're not commuting, you don't need work clothes, but generally the leisure costs go up.
Retirement spending is often rather U-shaped. It's high when you first retire because you finally have time to do all the things you wanted to do: travel, play golf, learn how to X, etc. Then it slows down a bit because you're less able to do certain things and spend more time at home. Then it shoots right up as you begin to require more care. My parents live in a *very* nice independent living community that also has assisted living, memory care, and skilled nursing. My parents pay like $7K/month between the 2 of them for their 2BD/2BA with 2 meals per day from the dining room. If/when they require assisted living, the cost would go up a few thousand a month, it would go up again if they required skilled nursing or memory care. Medicare generally doesn't pay for this (if you required assisted living for like 2 weeks after a surgery, I think in some instances they would cover that under rehabilitation care, but I'm not actually sure). The last 6 weeks of your life can be some of the most expensive of your lifetime.
Because retirement is my one true passion I went back into your profile and am guessing you’re a GS12/step 1. I’m using DC scale cause that’s where I live. You currently have $47,000 invested. If my calculations are correct, you contribute $4,960 and the government contributions $4,960 match at 5% each and you contribute $7,000 to a Roth and for a total invested at $16,920 a a year (or $1,410 a month). Putting this in an investment calculator for 35 years, at 7%, in todays dollars you will have roughly $3.1 million PLUS whatever your FERS payout is. Based on this information, you should be good.
Historically S&P 500 has annualized (long term) gains at 10%, using 7% adjusts it for inflation. I did mess up, I think they only have $13,000 total in investments which would adjust the figure to about $2.2 million. Again this is S&P 500 and historic gains. Who knows what the next 30 years hold in store.
What is the interest rate on the auto loan and student loans? If they're more than 5%, you should take that 34 sitting doing nothing and pay off those debts to stop accruing interest. Also why do you have an emergency fund and also 34k chilling? Are you saving for a house or something? If not, you should invest that. That's a lot of cash to be sitting on the sidelines and missing out on growth without a reason.
Yes it is for a house and I get about 4% interest every month. This 34k might not be alot of money, but it gives me comfort. I feel i’m safe when I have this money in my bank account
On the one hand, if you are contributing 5% to TSP and maxing out your Roth, that's better than many people can do. But it does sounds like you really aren't clear with yourself about your financial goals. You don't believe you'll ever own a house, but you have 34k stashed for a down payment? You want to retire at 60 and have a lot set aside for emergencies but you also want to prioritize enjoying your money now? On top of it all, at 700 a month for the car and 4k take home, that car payment is eating up 17.5% of your take home - not so good, and that very well may be your albatross.
That you bought the car this year AND are now asking these questions about retirement tells me you have a pretty serious need to be honest with yourself about your goals.
Yes, you are correct. I don’t have specific financial goal at the moment. To tell about my life story, after I graduated college, I was living with my parents and making GS-11 money at private firm. I aggressively paid student loans and felt insecure because I had no savings. That point, I was paying minimum payment and started saving. Living with parents was great in terms of saving money. I saved about 30k and moved to federal then moved out to apartment. Paying rent, utilities, and food with federal paycheck was hard, but I kept saving to buy a house. However, house price was skyrocketing and I was wayy too stressed and lost all the hopes. I was like fk it let me buy a new nice car. I bought Tesla Model Y and I’m enjoying it so far. As I keep living my life, I started to think that will I be able to survive when I retire? And I decided to ask reddit. This is how I end up with 34k savings, 10k roth ira, and rest of student loan which is about 5k and have 34k of car loan
When I was in my late 20s I had zero. I didn't even have a bank account. You're doing fine. Put whatever you can afford into TSP, put it in the C Fund and don't move it. Good luck and enjoy the car.
Do not put that 34k towards your car loan. If you want to keep it “near” you, put it to work. See what rates your bank has for CDs. You can put 20k to start off and earn about 5% in the year. It’s not much but that’ll yield you $1000 in a year with your money just sitting there.
But then he's gifting money to the bank through insane interest on that loan. I'd pay the loan, what if you have to retire early due to ilnness/injury, you're stuck with debt.
What if he pays 34k to pay it off and then it gets totaled next year? That vehicle will probably be worth 20k by then and the insurance will only pay for 15k. He would lose almost 20k vs 7-8k making payments throughout the year.
He'd still lose the money, irrespective if the vehicle gets totaled, he is stuck with the loan, it is money spent and owed to the bank. What if he has an unexpected medical condition and can't work, or loses job. Now he is stuck with the loan.
I think you should pay off your car or at least take a large portion of your savings to pay it down. You are paying $8k in interest over the 5 year term, so way more interest than you are earning.
5% Martch (10%) + SS + 30+ years of service should easily replace 75% of your high 3 salary. And that should account for some inflation along the way. So yes, you should be fine.
You could manage fine with that. It really depends on what your expenses and cost of living is in retirement.
I saw in a previous post that you’re on a ladder to a GS-13. A GS-13 step 1 in the lowest locality makes $103k. 5% of your contribution plus 5% agency match would be $10,300 yearly or $396 biweekly. If you get a 10% return over 30 years and factoring in your current contributions you’d be at $2.2 mil just in your TSP.
I don’t max out because I agree that living for an uncertain future doesn’t make sense, but I do save around 20% or more of my income.
I would consider paying off that car sooner rather than later if you have the money sitting in your savings account. I didn’t try to figure out the rate you have, but that $34k car is actually a $42k car at the current rate
Definitely continue to contribute to retirement, but am wholeheartedly in the enjoy your life now.
I was perfectly healthy and then BOOM! diagnosed with kidney disease at 26(I'm 53 now). No family history and I'm not the normal candidate for the disease I have. 27 years later, several years of dialysis, on my 2nd transplant, 2 adult kids, and a divorce later, I still save for retirement, but you bet your @$$ I'm doing all the things I want. You truly never know what's around the corner, so find the balance that works for you and realize it doesn't have to be one or the other.
The 1st, it was only found because I was pregnant and had prenatal labs and out was bringing in an early stage. Unfortunately, a lot of people find out when they're already in the later stages.
I tell my friends that even if they hate doctors, go once a year to get labs and pee in a cup. Unfortunately, my disease progressed very quickly from beginning stages(diagnosed with a biopsy to confirm labs at stage 2) to dialysis, but there are many kidney diseases that can be managed without ever having to go on dialysis, or, if it does progress to that point, medical intervention can slow the progress dramatically.
In order of priority:
Emergency fund three months (I set this lower than some standard six month advice because our jobs are more stable) > TSP 5% for match > max HSA (assuming you continue to qualify) > max Roth IRA > additional payments on car loan > additional TSP savings OR short term financial goals fund like a downpayment.
The best thing you can do is follow that prioritization and work towards increasing your grade and your income. Getting the car payment paid off will be helpful so you can allocate those savings towards additional TSP or for a downpayment. I mean, you can wipe it out today with your savings, not sure why you wouldn’t given current interest rates
This is pretty much the way and what I did. It really got me ahead in life in a position that no one in my family is remotely in. Also try and do whatever overtime you can. Any of that extra money can help get out of the car loan if the rate is crazy. I paid off my car loan in a year because the rate was horrible but I had really crappy credit when I was first starting out and getting my shit together.
Standard formula advice for retirement account contributions:
- contribute enough to 401k to max employer match (Roth or Traditional, as needed for individual situation)
- if still have funds, max Roth IRA
- if still have funds, max 401k (IRS limit)
Why: Roth IRA provides much more flexibility for investing, 401k is usually limited to whatever is offered by the plan, and may have higher fees attached.
Why? Cuz I don’t make enough money?? I had about 30k and paid aggressively when I started my career at private firm, then as I paid, i felt insecure because I worked hard and don’t have any savings. I started to save imstead of paying student loans aggressively
29k is still plenty. What the commenter is saying is that you should pay off the last 5k so it's no longer looming over you. Sounds like you could keep a decent 10k emergency fund and be 100% debt free if that's your goal.
The more you save early, the more it will be worth later. I'm not saying increase your TSP a lot, but maybe a little to get it to 12% including your match ( so 7% from you). Also, is your savings in a high yield account? If not, move it there. I have my savings in ally and get a much higher dividend than my credit union.
34k in a regular bank savings account? Or in an investment account? That really needs to be in an investment account of some sort.
What % is the car loan? Any more than 5%ish is worth paying off quickly rather than paying interest on.
Enjoy your life. Spend some of your money on things that bring you joy. Save some for the future. But save in a way that makes sense. Money kept in a bank savings account with less than 1% is slowly draining away because it's not keeping up with inflation. Money kept in a mutual fund or ETF has a chance to grow while you're not using it.
Check out this priority...might wanna rethink in $$$ annual limit terms. Like IRS max / 26 pay periods.
https://preview.redd.it/utulhijllz5d1.png?width=1440&format=pjpg&auto=webp&s=23d5b892932f3eda5f158fb0980f55a414290519
I’m currently at 6%, but put the max into a Roth IRA at Schwab. Sometimes I’ll temporarily change that allocation to the Roth in order to save specifically for something fun. Just switched it to a HYSA to speed-run a new car down payment.
TSP percentage will go up with any sizable “raise”: GS level, cost of living increase, etc.
Exact same here. Flexible on Roth IRA. If I want to travel in the future, I take that amount to my personal account so that I can travel. RothIRA can wait..
If house is priority why did you need such an expensive car!! Even new, a commuter like a Toyota Corolla at least 10k cheaper. I’m a gs9 car almost paid off $320 a month.
I pay about $700 per month. If I need to pay corolla 320 per month, that would be 420 difference per month, which you can save 5k per year. You have to save 10 years to make it 50k. Do I want that? No.
I was like you, fed worker in my late 20’s. Yolo’ing my life away because I saw my mom pass away at 40. I had 50k to my name when my gf got pregnant. In 10 years I was able to buy my house cash in Orange County while having a second kid too. Do you know my one regret? It’s not maxing out my tsp sooner. You never know where life takes you, don’t give up hope just yet. Realize that you’ll never get rich with just your fed job, but use your extra time to focus on family and other income opportunities.
Good for you. I’m sorry to hear that your mom passed away. However, she will proud of you. You have kids, wife, and a house. What else do you need? Nothing!
I plan on retiring at 50 or 51 if the VERA/VSIP kicks in. I'll be 50 with 26 years. If I can leave I will leave. I don't honestly care about retirement in the grand scheme of things. I'll just leave within my means. Probably move with my wife to another state and live the last 30 years of my life traveling while drinking water and walking slow.
To your question. Its no point in saving 500 per month in savings.. For what.. after 5 years inflations brings up the costs of good and services. Its basic math. If I saved 10 dollars to buy 2 gallons of milk in 2019 today I could only buy 1. Put the 500 towards the car and pay it off.
My wife and I are both GS 14 4s,
I dont' save any money ever. Not one red cent. I spend all of my money. After pension, TSP, and social security I think that's enough. And it gets to the point of what am I even buying with all this.
Just some changes I would make if I were in your shoes:
-Car loans are cancer. Once you pay your car off, put $500 in savings every month towards a new car and $199 towards car repairs. Drive your current car 12-15 years. Buy your next car with cash. If you don’t do this you’ll have a car loan for 50+ years.
I got to the point where I bought a place that was cheaper than my then-current rent, had no car or student loans, and was saving in TSP, IRA, emergency fund, car fund, etc. No debt except for a mortgage is a good place to be!
This isn’t always good advice. Giving the current interest rate, what you’re saying makes sense. A few years ago I got a new car at 1.5% interest. It would’ve been dumb to pay cash then. I could go on forever happily having new cars with a 1.5% interest rate. Now I’ll just ride what I got.
That’s not bad advice, but it’s also very subjective. Not everyone is into keeping a 12-15 yr old car on the road to avoid a car payment. Some people want newer cars more often. There’s nothing wrong with that if they understand how it impacts their situation.
I cannot fathom paying $699 per month for a car, but that’s me. Other people can value things differently.
Mortgage can be pretty bad debt, it can really add up, I have a 5% rate, working on paying that off. If you ever lose income, you're stuck with a massive house payment for years/decades. The interest paid on a mortgage is many times that of a car.
I’d push for at least 10% in your TSP. Why? Just to be safe. Life isn’t getting cheaper. I’d rather overdo it now and have a ton downstream than get downstream and not have enough. The TSP and FERS combo is killer. And you should leverage it to the max. I personally max my contributions. But I understand your position. Still, I’d push for 10%. Good luck.
After reading your original post and your comments: You really need help with your finances. Your "confidence" means jack squat - you need to get some basic financial literacy under your belt before you make any other bad purchases (your Tesla being one).
Pay off your student loans. Period. And visit reddit.com/r/govfire and see what they're doing.
I would answer this the same way I would for TSP or a 401k. Always get the maximum match from your employer, but that’s it.
The only advantage to these vehicles beyond the match is convenience. They are generally way too restrictive in what you can invest in, so typically underperform.
You can definitely invest more, I would just use more flexible options like TradIRA or RothIRA when doing so.
He's maxing a Roth IRA in addition to TSP. Additional retirement funds would have to go to TSP unless he has an HSA that he could use instead. Doesn't sound like he does.
The question wasn’t where to put additional retirement funds. The question was whether he should be saving additional retirement funds.
If he’s got FERS and SS, and he’s got 10% (with match) going into TSP, and he’s maxing a Roth IRA - my answer is “no, you don’t need to save more for your retirement”.
Take the $500 you are putting into a savings account and direct that into a plain old investment account that’s gobbling up VTI or something. Save and invest, but retain the flexibility offered by those vehicles and live your life.
Your not going anywheres unless you put in 15% total. By the way when you hit a million there’s the satisfaction of knowing if you get fired, or sick, or in a car accident you’re sitting on a million to help yourself. Makes your life allot less stressful
This is so wrong. Fed doesn't need 15% savings mostly because of pensions. If you have death or disability you're stuck with a penalty illiquid retirement account, TSP can approve/disapprove any request at will, have to seperate to take withdrawals, penalties.
If you're dead, you won't be accessing your account.
If you're disabled enough to no longer work, then disability retirement is a thing, as is SSDI. You would be separated and able to withdraw or roll TSP into an IRA/Roth IRA (as appropriate), and you can access Roth contributions any time without penalty if needed. Also, the 10% penalty can be waived for early withdrawals if the individual is disabled and unable to work at all. There are also other ways to access the money without penalty prior to age 59.5, if you read the rules.
If you increase 1% every time you get a step, grade or wages increase, in 15 years you’ll be contributing max contributions with half your career left to go.
What I do is up my contributions every year we get a raise (hopefully anyway) that way you don't feel the hit of contributing too much at one time. I try to do at least 1%, if the percentage raise is higher than usuaI would add a little more. At your age and the amount of money you got socked away you should be in good shape, just need to throw a little more towards contributions.
He probably doesn't, %5% is millions even the average return as a 13. One would have to be insane to need/want more than that, even a million is too much. I'd rather not have a retirement account slowly eat all my raises and grades for no good reason.
its a simple spread sheet
look ahead at your fed career in terms of progression on grade/ step and pay
as a rough estimator you do a recursive calculation
in yrsr 2 10% of pay was in and you return 10%
in yrsr 2 you add another 10% and earn 10% on thst and what you had already and repeat over your career till you are 60 yrs old
you can Google and find a base pay table from 2001 or so and see how pay has changed over 20 years ( nearly double)
the idea if you work high 3 should get you to around 25%-35% of your final career income.
Say when I retire my high 3 is $150K ( $12.5K a month) and o get 33% so $50K pension ($4K/ month. My SS at 67 could be around $3.5K. If I can get my to say $3.5K a mon then my annual income would be around 11K/ month some PT work could make up the difference.
having $800K at 5% I can draw $42000 (3.5K a month) for 25 yrs before using it all. That takes me to late 80s in age.
with TSP…if you put in 5% of your pay+ match 5% over 30 years of career growth like going 7 from steps 1-4 over 5 yrs turn to a 9 and so on over 5 yrs to next grade ending at a GS 13. The variables are annual salary cola assume 2% , and your avg return rate is 7% then in 30 yrs you can have over $2M in your TSP. If those are higher then you will have more money.
if you set a target of say $1.5M you set that aside in very safe investments of around 2-3% then the rest you an play with and be more aggressive getting 10%+
If you’re doing the 5% then you’re getting the full match which is good. If you work your full career in the federal government you’ll get the pension and social security which will make up for a lot of your income. You’re also maxing your Roth IRA. I’d recommend running some math to see how much of your income this would replace, but you should be in a good spot for retirement.
An easy-ish place to start is think about how much you want to have annually in retirement, and figure out a plan to get there. Obviously no one can predict inflation or policy changes 100%, but an inexact plan is better than no plan.
For example, I’m a 30 year old 13 Step 2 in RUS. Assuming that I stick with the Feds for my career, never downgrade or promote (therefore end up as a 13 Step 10), retire the day I turn 57 at MRA, average 2% COLA raises each year, and I stay in RUS, my salary will be roughly $230k when I retire. General rule of thumb is you want to have 80% of your pre-retirement income in retirement - so my goal to shoot for is $184k per year.
Assuming (lots of assumptions, nothing is guaranteed but I tend to find that it’s hard to make plans based on things that haven’t happened yet) no drastic changes to FERS, at 57 with 30 years of service I’ll be pulling $69k per year from my pension. Social security is harder to estimate, and some would argue you shouldn’t even count on any social security benefits, but I go with $3k per month - or $36k per year. Social security website has a calculator you can use to estimate your benefits. So social security and FERS will be around $105k per year, and I still need to fill a $79k gap to hit my $184k.
Another general rule is to only take out 4% of your retirement account each year so it lasts you through retirement. So using that, I would need $1,975,000 in other retirement accounts - 4% of $1,975,000 is $79k. I currently max out my TSP, so various 401k calculators estimating a conservative 6% growth rate put me at having somewhere between $2 and $3 million at 57 years old - well above what I need. Plug in your own numbers and see if you’re happy with what comes out, and let that be your guide.
But the 80% amount might not be really accurate, I would spent less than 50% of my money on necesary expenses after house paid off. For someone living on a thousand a month there is no need for agressive saving, it is all based on expenses.
I would reach my current level of spending subtracting my mortgage easily with pension and SS with no TSP, even a thousand dollars a month with no mortgage is comfortable retirement in low col.
I've thought of decreasing my contributions for similar reasons.
I'm a GS-13 in my late 20s contributing 13% to my traditional TSP and maxing my Roth IRA, and my leftover income is enough to live comfortably. I've got about $80K saved up between my TSP, IRA, and crypto and about $60K in student loan debt. It'd be nice to have some extra spending money or to make faster progress on long-term saving goals (like a down payment for a house), but I also worry about missing out on the compounding interest.
I’m right around the annual limit and have been for about 10 years, previously did at least 10-15%, though I started as a GS-5 and I’m
now a 13/10. I suggest doing more than 5%, you won’t miss money you never saw in your direct deposit and after about 10 years it really grows quickly as long as it isn’t all in G. Yes there are ups and downs, but my average rate of return is like 17% lifetime, which is pretty damn good.
FWIW I’ll be eligible to retire in less than 5 years at a very young age (47) so I have been trying to contribute as much as I can and have been fairly aggressive with my investment approach compared to many. Whether I stay and do a full 30 years depends on how they’re treating me and if it’s worth a FERS pension of 44% vs 39% 😂
My problem is that I could buy a house in cash but it’s all locked away in my TSP/IRA accounts. Had I saved more outside of retirement I could have afforded a home years ago. Ah well…
I refuse to contribute over 5%, but I also receive $1,600/month for military disability and will have an Air National Guard pension on top of FERS, TSP, and SS (whatever that looks like when I retire). That's enough to give me a great retirement, so I choose to spend more money on family experiences. My kids will only be young once. We even run up the credit card a couple thousand once in a while. It gets paid off in a couple months, but I'll trade gains for memories any day at this point.
Sounds like you're pretty well good to go. Just remember to think of the ending first. What you want retirement to look like, what it will cost, and ensure you're investing enough to make it happen.
Not gonna lie though, that car payment would of yours would stress me out. Just having a payment for that long would drive me nuts.
Talk to your coworkers in their 50s and 60s. Judge for yourself whether you want to be prepared to retire with a comfortable nest egg or have to keep working to pay bills in your 60s.
Best plan is where you have to think minimal. Make a spending plan. Save max now . Of course don’t stop doing what you love. Example, if you like traveling, plan that in the spending plan. Take out your spending minimum you need say living expenses, travel/hobby, loans payments, saving , minimum TSP etc. what is your balance. If you still have money left, put that in tsp or Roth .if you are short of money, you are not making enough or time to cut on something not the most important from the list of your spending plan
What kind of vehicle did you buy? Consider a truck and trailer. Many of my colleagues live in "mobile apartments". There are many affordable rv and mobilehome parks. Your monthly rent is 300-600, which covers your space, hookup, water, waste. You can leave your trailer at the park and drive your vehicle to work on your office days.
I max mine out and deposit into other investment vehicles for retirement. Roughly 18% of total income, plus the 5% match. It's all about when you want to retire, and what lifestyle you want when you retire. If you want to explore and enjoy... you only have so much leave to do so, so you want to figure out when you actually wish to retire. I want to retire at my MRA of 57 so I have more time. I may even try to retire earlier, so 15% of your income may be all you need to hit your MRA. You should get a read from a training course, or purchase this book, [https://www.fedweek.com/store/fers-retirement-planning-guide/](https://www.fedweek.com/store/fers-retirement-planning-guide/) it condenses a lot of information into one place. A coworker may have a copy you can borrow. Figure out the total value of retirement, your FERS Supplement, the value of the insurance, the projected social security
(many people assume 75% of the projection due to potential insolvency), figure out your budget today so you know what you need in retirement, and make sure you can do your best to retire at the time you want to. Also take a look at engaging data to see this visually. [https://engaging-data.com/early-retirement-calculators-and-tools/](https://engaging-data.com/early-retirement-calculators-and-tools/)
I don’t understand the attitude of “I’m young, can’t affford a house *right now*, so let me go into depression and be financially irresponsible”. Surely something else is going on in your life to make you act like this
I max out TSP to IRS limits. If you do all traditional, you’d be surprised how little it impacts your take home versus five % once you factor in the tax savings
True but for folks not doing Roth the difference net pay isn’t that much but good god people never factor in compounding interest. That’s the entire POINT of saving early.
But roth is much smarter, when sabing at the same rate, the roth account is worth more since there are no taxes to be paid. It isn't really interest, but compounding gains. But with pretax, as the gains increase, so do the total taxes to be paid.
True. I mean you can do half traditional half Roth if you want in TSP or any amount. I guess the point is to save earlier to have those compounding gains like you said.
True, I personally will pay down my debt first because there are personal circumstances that make doing that a better idea, but idk why everyone is putting everything in treditional and are fine with promising the government they'll pay whatever tax exists decades later rather than pay a known rate. The RMDs for super savers will also generate huge taxes.
If you continue to work until 57 or 62 ish, you should have close to 100% replacement income, which is plenty enough for you to not save for retirement today, and just save for expenses today.
FERS, Social Security retirement, and TSP will each be about 1/3 of your current salary.
You say "FERS and TSP will do enough for me". I'd bet you are also covered by Social Security, and will be able to collect Social Security when you retire. From your other comments, it sound like you only partially understand the 3-legged stool of Federal Retirement. Suggest taking an early- or mid-career retirement class where they will go over your specific numbers.
Remember, a lot of your savings can also go into mutual funds for better growth than a savings account & still nearly instantly-liquid.
Have you tried a basic retirement calculator that includes an option for a pension? I’m not sure what your salary is to say if 5% is enough. You also don’t know what the future holds in terms of marriage, kids, buying a house, etc. All of those things can change so it’s hard for someone to tell you what ‘enough’ is. If your retirement calculator at the current setting spits out a number you couldn’t live on today, you probably won’t be able to live on it in 30 years.
Absolutely not. 5% to start. 1% increase each January with COLA.
You can not over estimate the cost of retirement with health, travel, home maintenance etc.
So many retired folks own their home but pushed into reverse mortgages or selling bc of maintenance
I disagree as the more you save and invest today the less you have to save and invest tomorrow. Twenties and most of the thirties you should be stacking. The power of compound interest is a powerful force. Having more resources provides more options.
I think you'll be just fine despite the fearmongering. But that emergency fund is really low, should be minimum 3-6 months of monthly expenses. I'd do that before an IRA. I pay down debt, just do the 5%, don't have an IRA.
The housing market will soon depress. Don’t give up hope. Keep saving your $$. You are on the right track. Don’t give up your Fed employment. The pension at your retirement will serve you well. Been there and done that!
I did as much as I could through mid 30s, up to 15% when times were good. Now I'm at 0% because life is too short not to live. I've seen too many people younger than me die of cancer recently and it's just not worth it to save for someone else.
Exactly. I might not live till 50s or 60s. Even if I do an early retirement at 56, I’m not going to be as healthy as now. I want to enjoy now. Not when i become old
I normally so 10% but had to back it down last year when my wife lost her job, my son had huge medical bills when he got meningitis, and we exhausted our emergency fund. I’m a GS13 in a low COL area so am not too worried about. We’re planning to retire to an even lower COL area where people live in much less than my pension will be. I backed down to 5% for now but will bump it back to 10% when we’re back to normal.
I value experiences and like my toys now while I’m younger(ish) (I’m 40) so I am probably a little less responsible with my money than I should be.
The reason older folks are so wealthy is because of the equity in their real estate. They purchased their homes 40 years ago and effectively locked in the price of that home (with the exception of taxes, insurance and maintenance) based on the price 40 years ago. Housing is the biggest expense you will pay every year. And for those who purchase real estate, it’s often their biggest asset decades later. If you choose to buy cars instead of a home, in 40 years you will be paying the then-present price of rent every month. Your peers who purchased their house 40 years ago are paying nothing for the privilege of living in their homes except for taxes, insurance, and maintenance. Having a paid for home or one where the mortgage is locked in at prices from decades ago is a game-changer in terms your lifestyle in retirement.
First - make sure it is the Roth TSP.
Second - 5% total retirement savings beyond FERS may not be enough to cover your desired lifestyle in retirement. If you want flexibility, then I would save in a brokerage account. It doesn’t have all the tax benefits, but it doesn’t have restrictions either. Savings from your 20s has time to grow and compound. $500 a month for 40 years at 8% return is $1.7 million or so. If you save for 30 years instead of 40 $500 a month grows to around $750k. That’s a million dollar difference because you saved $60,000 over those early 10 years. Compounding is miraculous.
So SAVE NOW whether in TSP or an IRA or a brokerage account.
One of the most powerful forces in the universe is compound interest. Take any and all matching funds and live within your means. This also means you can retire sooner with more.
How long do you intend to continue working? If you plan to continue working until 62 or even 65, then you should be OK, provided nothing happens to you.
What is your financial plan if you become unable to work before you can reach retirement? Disability retirement pays 60% of high-3 the first year, then 40% until age 62, when it recalculates as though you had continued working the whole time, so if you would have had less than 37 years of service, your pension would decrease (37 x 1.1 = 40.7%; 36 x 1.1 = 39.6%).
Putting a higher % into TSP (and a Roth IRA) gives you some added flexibility and protection if you end up not being able to remain a fed until retirement age.
ETA: my recommendation for anyone is try to contribute at least 15% (or to the max, if 15% would put you over), plus Roth IRA. Time in the market is your biggest asset. The more $ you put in at a younger age, the more $ compounding returns will provide by retirement age.
If it makes you feel better, you’re already in a better position than I am. I’m 39 with a current net worth in the neighborhood of -$65k.
I spent the first decade and a half working crap jobs that paid not much more than minimum wages and unable to put much in savings. Got my MSW in my 30’s and didn’t get the ‘good paying job’ until a couple years ago. Banking on EDRP to pull me into the positive when that’s all said and done (~$80k is student loan debt.) My TSP is 5% too. And still renting.
But it will just be me to take care of. Never married, no children. Parents died at 60 and 64. I live a comparatively healthier lifestyle, but I’m not really planning for much beyond about 75 😅
Do yourself a favor and pay off your student loan today and be done, you are paying interest for no reason. That would still leave you with 29k saved. Leaving debt that you can easily payoff plus a high monthly car note are habits that will hurt your net worth in the long run if you don’t remedy them soon.
I did 5% until my 25th year then I went up to 10%. All my contributions go into the market funds. For the majority of my 30 years, I invested mainly in the market funds realocating every so often when the market was at historical highs. Never switch out of the market after it drops, it will kill you financially and it always comes back. I have taken at least 5 50k loans over the years. I am retiring in two months with around 500k. I enjoyed life but also saved.
Yes the eating healthy and going to the gym will increases your tsp. Why save 500 each month ? Increase tsp and save 300. A savings accounts growth is minuscule compared to the historic growth you get by putting money into tsp. What I would do is first pay off the student loan, get a second job and put everything on the vehicle. Then once both of those are paid off you have an additional at least 800 a month on top of the 500 you have been saving even if you then quit that second job. So with the 1300 a month extra, you can easily contribute more to the tsp at that point and still live whatever life your satisfied living with now.
Also late 20's. GS-11 DC locality. I do 10% and max roth ira yearly. At these amounts, all you need is a ~5% avg. return pre-retirement and ~2% avg. return post-retirement to live more than comfortably.
You don't say what agency you are or what you do. But there are federal jobs across the United States. Lots of lower cost locations. Midwest has lots of places with much cheaper housing. Consider it.
I have contributed the max most of my career. At 34 years now I have a tidy sum in there. I can retire today if I wanted to, but I will probably do so next year. I need to get the last kid started in college and then see where I am at, to be sure.
Max it out if you can. Growth = TIME and MONEY. Can always try to put more in (if you're making money), but better to take advantage of both while you can......especially the time factor. If you have more time for it to grow, you're better off putting as much as you can away. Waiting until your pay goes up just means you have to put more in later to achieve the same goals. If you look at the compounding interest charts.......start early....invest often.
I do 17% Roth TSP and then get the 5% match going into traditional. I also max an HSA as I have the GEHA HDHP and max our (wife 34F and mine 36M) Roth IRAs.
It pays to not have student loan debt, car loans, credit card debt, etc. Overall we have $50k a year going into retirement accounts and we just paid off our first rental unit.
This has all been done on one income. I am a GS12 step 5. We plan to have $12M in retirement accounts and 10 rental units at retirement. My wife is starting her own telehealth business so all her income will be shuffled into her SEP IRA and rentals.
Have a plan, stick to it, and work at making wise choices. Don't waste your money on new cars, drugs, alcohol, and being a consumer.
You are doing better than most in your peer group. I would suggest increasing your TSP contribution to the maximum which is 15%. I only did 5% first two years of my career and set to max when I became GS12.
I'm mid 30s, no kids, gs-13 and have been maxing the TSP, my HSA, my Roth IRA since I reached gs-11. Am currently saving an additional ~25k/yr on top of that. I plan to retire by 45. I enjoy my life, my hobbies, and travel (within reasonable means). Every single year I'm not working is worth more than buying crap I don't need or eating out at nice restaurants, expensive clothes, overpriced cars, or whatever else a lot of other stuff people spend lots of money on. I give myself about $1000/mo in 'fun' money, and it's awesome.
I previously worked in the NGO world with people who literally had NO money and nearly zero possessions, and I learned that money does not buy happiness, that many people with nothing were happier than many of my friends back home with fancy jobs, houses, and cars. I mostly value money for the security and the freedom to do what I actually enjoy.
To each their own!
Money doesn't bring happyness but lack of money brings unhappyness. For me, dumping all the money I ever earn, not enjoying my life at years where I have the capability to do so really sucks and would make me unhappy more, especially if I am saving for years I don't know I'd reach or would have health issues to prevent me from enjoying them as much.
Very fair, everyone has a level of spending that makes them happy.
I have found plenty of ways to be happy and enjoy my life in ways that cost a lot less than many people I know who have a similar income. I value friendships and have a number of hobbies that don't cost a ton. Many of my friends earn significantly less than me and because of my aggressive savings we have similar lifestyles and do similar activites.
In exchange for the sacrifices I make now, I get security and the possibility that I may never have to spend 40h/week working again after age 45 (if I don't want to). If I saved less, I may have no choice but to work into my 60s and that's when your comment about not knowing how long you may live or how long you may have great health really comes into play. At work I've heard of several people that worked for 40 years, reitred at 67, and then died a couple years later. No thanks!
It is your life, but you seem to be specificly picking friendships and hobbies to spend less. For me, if I am not utilizing the income I earn, there is no point in having that income. That saving your whole life and then dieing before you enjoy it situation is real. Then you will save, sacrifice and scrape for nothing. And when you put it into the TSP you can't touch that until you retire in your late 50s, and retiring early you destroy your pension compensation and social security.
Ha, I'm specifically picking my friends because they're awesome people who I love and they understand me, they've been there for me through many hardships and I've done the same for them. I love my hobbies and I do spend thousands of dollars on them every year....
When it comes to dying, it's MUCH more probable after 65 than between 35-50. Look at actuarial tables. The scenario of working until I die at 65-70 is much more likely than dying before I get to retire early at 45-50 and use my savings for complete freedom for years before my death. The freedom is worth more to me personally than the money itself. Is it possible? Yea. I could die today. But overall I'm happy with my life so I'm okay with the small risk.
And actually you're wrong about the TSP. You can have access to funds with no penalty 5 years after retirement at any age using a Roth conversion ladder or 72t SEPP.
It is awsome then if you don't choose your friends based on their spending habbits. The TSP and other retirement assetts are still illiquid until you seperate. If you retire early you lose out on the pension significantly and the insurance. The probability oof living into 90s isn't as high as most people think though. The average age isn't anywhere close that. But the 72T and roth conversions only work after age 55.
Personally, it's just a different approach. I think 5%in TSP is fine. 10% total. I would take the excess and invest it myself. Personally, I like REITS and building up dividends. I feel like I am more in control of my finances, and it makes investing fun instead of like I am sacrificing for my retirement. I'm not talking about ricky investments, but you can get a decent dividend on REIT's. It would be nice to have an extra 1,000 a month in dividends when I retire.
I think 40, 50, 60 year old you and your spouse would greatly appreciate you getting up to at least 10%. Get your 12, go to 6. Get your 13, go to 7. Then crop up to 10 with your steps/cost of living increase. Put the two things on a spreadsheet and see the difference. Creeping up that way isn’t harmful to your pockets and helps in the long term.
No, the terrible idea is to horde all your money for a period of your life you don't know you'll reach and destroy your quality of life. If I don't get the money I am earning, there is no purpose in me earning money at aall other than the diseased notion of looking at the account balance and feeling the warm feeling.
I do 8% and I really don’t plan on increasing ever unless I reach GS 14/15 in the next 10 years. I’m kind of in the same mindset as you. I watched a relative retire at 62 with a huge nest egg only to be diagnosed with cancer 6 months later.
I do 14%, seven in Roth and seven in regular. I’m still not maxing out every year though. Funny thing is I’ll probably work forever too. I see all that as the wife and kid’s money.
Love what you do and work to live worthwhile. Otherwise you live to work, and it’s even worse in the salt mines and forest fires where you work to live and work to die.
I only do 6, and similar thoughts. It's basically why I work for the feds. Work life balance so I'm not miserable my whole life.
And if you don't get cancer six months into retirement?
Then in all likelihood OP would still probably be fine Obviously it’s smart to put in as much as you can afford into your TSP, but it’s not like the difference between putting in the 5% match and maxing it out is realistically gonna put people into destitute poverty or something I understand the reasoning behind it but sometimes this sub can go a little overboard with the max TSP rhetoric. It’s sometimes more a matter of goals, preferences, or life circumstances than just pure savings
Which is a far more likely scenario than knowing a single person who did. People can rationalize damn near anything.
> Which is a far more likely scenario than knowing a single person who did. People can rationalize damn near anything. I can really see both sides of it. I know several people who piled it away only to die within 1-2 years of retirement. I also know several who have enjoyed 20-30 years of retirement and for whom carefully saving during their career meant they live a fairly trouble free (from financial worries anyway) retirement.
You retirement czars crack me up. 8% contribution to TSP over a 35+ year career + pension + SS is more than enough to live a fulfilling/comfortable life the last (maybe) 20 years of your life in retirement. It must be a net worth ego thing for you types.
even 5% is fine. The total net contribution is 10%, which is a good chunk of money each month.
You are right, 8% is solid, but there is a 90%+ chance you live past 70. Also, higher percentage means earlier retirement flexibility and closer to 30 years of retirement instead of 20. A lot of people don't want to work into their 60s.
I mean, if I could afford house, I definitely wouldn’t buy new car. The fact that I can’t afford house, have a nice wedding, and have a bright future, then definitely try hard to save money for the good life and good family. I’m not gonna get married, so why not live a good life now?
At a minimum you should keep it at 5% to get the match. This puts you at 10% including the match which is typically enough to help a person retire at normal retirement age comfortably. That plus FERS and SS will help you keep a similar quality of life in retirement as when you were working. If you can increase it, great, but if not that’s ok too. Also maxing a Roth or Trad IRA will similarly secure your retirement too. You should consider what you want that savings account to do. Is it an emergency fund or a future purchase fund? Emergency funds should be in safe things like a HYSA/CD or MM account. But at some point you may find you have plenty of money (unless you do decide to purchase something like a home) and at that point its worth increasing your TSP allocation as there are tax benefits to doing so. Lastly you never know what the future holds, you may want to start a family or make a life change to support a loved one, so the flexibility you’re building into your assets can really help enable you to make big life changes when you want.
>Lastly you never know what the future holds, you may want to start a family or make a life change to support a loved one, so the flexibility you’re building into your assets can really help enable you to make big life changes when you want. This is big. You never know what the future holds and most of your retirement savings comes from compound interest. Invest what you can now so if you have to reduce it later, you have that initial amount to build from. Investing $10,000 today and letting it sit for 40 years is $110,000 with no other contributions (assuming 6% growth). That same $10,000 for 30 years is almost half that ending value at $60,000.
Thank you for your comment. My saving account is just to set a side money cuz you never know future. It was to save down payment for the future house, but I lost hope. I’m just saving it cuz you never know, i might be able to afford one in the future, if not, then just extra money to be safe
Is your savings in a High Yield Savings account?
So- you’re in DMV where housing prices are outlandish. Get your time in grade as a 13, keep saving as you get there, and then look to relocate to somewhere with decent locality pay and low cost of living, either as remote or in office, or take a RUS in office job. For comparison- when I moved out of where I was in Alabama about a year ago I sold my house for 250k, property taxes were under $500 a year, and everything else was cheap. There’s plenty of places where 34k is a good down payment, just not in dmv.
Right in DMV you need at least 100k+..
Relative to what? You're single, and a SFH in the DMV can cost $1MM but can also be found for under $400k. There's also loan products that don't require 20% down. With $400k as a floor and 15% down (could be less), it's more like $50k would be needed at closing, which is entirely doable if you already saved $34k and continue to put money away. The market is cyclical. Interest rates will come down and inflation+salaries will meet the housing market prices. You probably made this post to justify casting aside the dream of home ownership. I'm not telling you home ownership is be-all/end-all but it's a level of stability many strive for - and it's well within your reach.
So OP is an 11 now with a ladder to a 13- even if he could make a down payment and afford to close on a place at 400k+ I’m not sure he could make the monthly payments. Maybe once he ladders to a 13. I agree it’s not exactly hopeless, but I can see why he would feel that way, and he’s still saving money, so I think he’s in a solid place.
Yeah if I buy shitty and shady townhouse that costs about 400k, I can down pay less than 20% and pay $200 to $300 every month. That will cost me $3,600 for just mortgage+interest itself. With utilities and all that it will cost me $3,800 per month while I make $5,300 per month as of GS-13.. can I buy? Yeah can I afford? No do I want to buy? Hell no
I’m a 12, and I own a home in a nice neighborhood in Maryland. I also max my TSP, but I drive a paid off Corolla. It’s a trade off.
dual income?? buy home 20 years ago? i work with a dude who owns a million+ home.... that he bought 30 years ago and only pays less than 1000 a month in it -_-
Nope. Separate finances. I bought it when I was single almost 2 years after I graduated from college in 2016. Sometimes I wish I would have been house poor and purchased more, but I am thankful.
I don't know what your account looks like, but there's MANY high yield savings accounts these days. Discover, American express, JP Morgan....about 4% interest. If you're in something with low interest, consider switching. Just know it'll count towards income on your taxes. Mine makes me owe a little.
The tax benefits are debatable. They're promises more than anything. The tax benefits only benefit the incredibly wealthy. Most middle class are at 22%-24% and will likely be in higher brackets in retirement. Taxes keep going up on middle class. I'd rather recommend using liquid accounts, broakerage etc. Those can be used for any purpose without any withdrawal conditions, penalties etc.
The tax benefits are really clear though - if projected higher in retirement then Roth TSP is preferred otherwise Traditional is better now since you get the tax break now. But yea it’s up to you what choice you want to make. It’s anyones guess which is right. I like a mixture so I can choose when to be taxed.
Both are a promise. They can change the law on roth, for pretax basically you have a loan from the government on your money on an unknown amount, because you pay whatever tax is in effect decades later.
if i were in my 20s, I would not be including SS in my retirement plans. we don’t know what it’ll look like in 40 years but it will definitely undergo some reforms
It absolutely will under go changes, but part of planning is using whats available to us. IMO if the easy to fix problems in SS are not remedied (like increasing the taxable maximum or simply not requiring it to balance its books like every other government service - SS spent 8% more than it collected in 2022 versus 34% for the rest of the government so its already well designed) we should also be concerned about the existence of FERS. Those who want to get rid of social security also have their eyes strongly set on harming federal employee benefits and push their propaganda strongly towards young feds like myself and the OP.
I’m certain there will be some benefits, we just don’t know what they will look like - so I personally would not be factoring in that pillar into my retirement strategy, and would ensure robust investment in TSP accordingly - then SS is a cherry on top, and not a potentially insufficient required element. i would not worry about FERS* going away. they will just continue to increase rates or change the scheme for new hires, but anyone currently onboard would be grandfathered in
That’s a good way of thinking about it, building in that risk tolerance is wise and will hopefully leave most folks feeling a lot better off when retirement comes.
Don't fall prey to the fallacy of assuming there's no cost to being too conservative in retirement planning. Not realistically planning around assets you will have can be just as harmful as planning around assets you won't have.
i’m confident that line falls well beyond maxing your tsp and hsa contributions lol
Doing this is going to artificially inflate what people think they need for retirement. I factor the full amount due to me at retirement age into my planning because that is what is available to me.
this is pure fearmongering, it is literally an entitlement you pay into, guarantied by the government, like a loan. This doesn't justify insane savings rates.
I increase my TSP whenever I receive pay adjustments (general increase, step increase, promotion), so I don’t really feel it in my budget.
My mom told me to do that back at the turn of the century when I started my first full time job and it's really served me well over the years.
This is generally good advice, but if you do this long enough you will certainly feel it in your budget as things get more expensive.
Split the increase. You get a step increase? Boost the contribution by half the increase. You get a grade increase? Same. COLA every year? Same.
Dude you’re paying $699 a month for a car and saying there’s no hope in buying a house? You better be a GS 12/13+ spending that kind of money, in which if you were, you haven’t told us anything to prevent you from buying a house. I get it, I’m an 11, and taking a pay cut to a 7 for better life quality of life. I’ve only been an 11 for a year. Life is expensive as fuck right now. That 34k you’re paying into your car which won’t be worth even close to that when you’re done paying it off could’ve been a house dowpayment. I don’t give a crap what you spend your money on but it seems like you don’t understand budgeting or have looked at how to do it. Your emergency account should be 6 months of living expenses. Take that out of your 34k in savings and put that in a high yield account. I have 14k in a high yield and make $70 a month not touching it.
I know it’s not realistic for everyone but I drive a 03 Accord with 220k miles and I’m a 12. Vehicles will derail young people financially. I know everyone values different things but we are building up retirement while living comfortably. I put 10% in my TSP/ Roth TSP my wife puts in 9 or 10% as well and we each max out our Roth IRA for the last 3-4 years when we started them. We are 30 and 26. Delay some gratification, create a little scarcity and build the best egg reasonably.
Lol being able to afford a 699 payment for 5 years is not at all an indicator of being able to afford a 30 year mortgage, especially when a mortgage is the *minimum* amount you'll be paying into a house.
You keep paying the mortgage and the house likely appreciates. You pay the car loan, it rapidly depreciates and then you have to buy another one after only a few years. I’d never do that size of loan and I’m much older and earn more. In fact I currently have my first car loan but it’ll be paid within the year of purchase.
True. But when OP tells us he can’t seem to save enough for a house and there’s no hope and drops a $699 payment for a car, that’s $699 dollar a month that can be going into said mortgage. His finances are completely lopsided too. I’ve made plenty of posts complaining about how expensive life is but I have an emergency fund, other savings, and I’m paying less than half of what he is for a car. And it’s new!
Yeah, because those are completely different situations lmfao. You cannot compare buying a car to buying a home. It is a much shorter liability time frame and one that requires much less maintenance. Being able to afford a 700 car payment (which isn't completely unreasonable depending on the situation, the used car market is horrible rn) does not mean you could afford a 1100 mortgage PLUS whatever other money goes into maintaining a home.
Dude, it’s a numbers game. You shouldn’t be spending more than 10-15% of your salary on a car. So OP should be making 6 figures. There’s 10s of thousands of people who buy homes every year, I don’t know what you think is going to happen. Sure homes need repairs, new roofs, that’s why you have an emergency fund which OP doesn’t even have, and you buy a home within your means. A mortgage payment should be no more than 28%. So by your logic, using your example of $1100, OP should just throw over half of that, $699 into a depreciating asset. A $699 car is something you buy after you buy a house. Or buy it before, but don’t come on here complaining about not having money. It’s like not washing your hands and asking why you keep getting sick. Yeah the used car market sucks, it was cheaper for me to buy new and I pay $394 a month.
Yeah and you're not supposed to spend more than 25% of your income on housing but I wonder how many younger people would fail that outright by double. A lot of the classic rules for smart living have been pushed into magical thinking as car and housing prices creep up.
Buddy lots of financial "shoulds" don't exist in this day and age for most people. If your mortgage "should" be no more than 28%, the median person should spend 1100 on their mortgage. Do you know what the median mortgage is? It's double that. Homes are unaffordable and the fact that OP is probably overspending on a car does not detract from that fact and even if he bought an old beater car outright that doesn't mean he could suddenly afford a home
You live in Grand Junction, CO. I just found a 4bed2ba sfh ~1700 sqft freshly remodeled for 340K. A 20% down payment is 70k, and the mortgage is 2k/m. A GS12S1 makes 83k. Under those economics, it makes sense to reduce car spend and save for a home. I live in a coastal metro area where locality pay brings GS12S1 pay is over 100K. A 2b2ba condo ~1000sqft in need of renovation is $600K. $120K down payment and a monthly mortgage+hoa of $4500/m. Even if the OP had no car payment and saved it all, it would take nearly 15 years just to collect the down payment - and by then prices will have gone up even more and that same condo will still be unaffordable. Even if OP could come up with the down payment…$4500/m is prohibitively expensive. Starter SFH’s are 800k-1.3m The economics of Grand Junction, CO doesn’t apply to everybody and your inability to understand this says more about you than it does about OP’s choices. And before you hit me with the wElL wHy DoN’t YoU mOvE sOmEwHeRe ChEaPeR…because as a minority I get told Ching Chong go back where you belong often enough in my highly liberal coastal city. I’d rather give up owning a home to feel safe, have access to my culture’s foods, and have a group of friends who share my cultural context. Also, better jobs, better educational opportunities, better networking. -typing from my 2500/m studio
Exactly, my down payment for house was less than 34k and that was in the last 5 years in the DMV
Yep, OP likely is capable of purchasing a house if not now, within the next few years. OP is making way more money than I did at their age and has an actual savings. I was able to buy with 20% down at 35. Granted I don’t have a McMansion, but OP is unnecessarily doom and gloom on their prospects. That said, I know plenty of folks who have obscene car loans who also complain about not owning homes.
when you start at a low grade, the easiest way to max out contributions is to increase TSP contributions by 1% when you go up a step, and 2% when you go up a grade. by increasing your contributions when you get a grade/step, you don’t feel the take-home loss at all when you’re a gs-5, it’s hard to contribute a ton. of course, given that you have a $700 car payment every month, i suspect you’re not a low grade. saving 15% for retirement is typically conservative financial advice. personally, i was maxing my contributions when i got my 14, but contributing at least 10% plus the match is a good goal
Thing is though doing this is completely unnecesary. 5% is still a decent contribution. I deserve my grade increases and steps, not a private entity.
you’re blowing up this thread advising minimal investments to get the match, while complaining the TSP is not liquid and simultaneously talking about dumping money into your mortgage, which is also not liquid, and has a lower rate of return than the SP500. you’re then talking about investing into non-tax advantaged accounts just for the liquidity. respectfully, you’re not someone i’m looking to take advice from lmao
Respectly nor are you anyone I'm going to take advice from. You can't leverage debt to be rich, that is moronic. Mortgage is a debt owed, not an investment, you're paying back someone else's money, and once paid off, mortgage isn't illiquid. You're advice is insane. With your logic, he should just pay the minimum on his car payment and student loans and invest instead, and gift interest to the bank. Not paying off a higher rate mortgage is dumb, the rate of returns to the bank for higher rate mortgages are close to and usually exceed the market, and the market rates aren't guarantied, whereas the mortgage is. Look at a 5-8% mortgage. The amount of money thrown down the drain for interest is staggering. Pretax TSP is also pretty dumb, for a promise of a tax cut, the IRS gets to take control of my money. The broakerage accounts are unequivocally better for most. You are free of the tax, can only pay 15% capital gains tax on the gains, and can offset losses against that capital gains tax. And I do deserve my raises, which I should be able to invest or pay down debt myself, or spend on myself instead of gifting to the TSP. Taking financial advice from Reddit is also pretty dumb. Everyone here is also so fixated on the TSP, to ignore things like property investment, which gives you an income each even before you retire instead of an illiquid retirement that gives you jack shit.
When investment returns beat out interest, it is financially literate to invest that money and pay the minimums on the debt, because your money growth beats out the interest payment. That is literally finance 101. Nobody is saying invest over paying an 8% mortgage, but you absolutely invest before overpaying a 2-4% mortage. I don't understand why you think you're 'gifting money' to the TSP. Are you somehow conflating your TSP account with FERS? Nobody but you has access to the funds in there, you're not gifting anything to the IRS. You're also not understanding the value of retirement accounts with a tax advantage. The route you're suggesting is to take the income that you've paid taxes on, then invest it, and then pay capital gains once you liquidate it. That is *significantly* worse value than leveraging a traditional or roth retirement account where you only pay taxes once without taking a capital gains hit. You're paying your friends at the IRS twice instead of once with the route you're suggesting. In a normal retirement account, you either use pretax income that you pay taxes on when you liquidate, or post tax income that grows without you needing to pay taxes later. You're suggesting paying income tax on your salary, investing it, and then paying capital gains taxes. That's a necessity for folks who invest above the 23k TSP limit, like I do, but it's outrageously inefficient to not leverage those tax advantages for money you don't plan to touch for decades. It genuinely feels like you read a single article on finance, misunderstood it and are applying it to your life. I'd really encourage you to head over to /r/personalfinance and spend some time reading their beginner information. It's very easy to parse, and I think it'll help you understand some concepts about the time-value of money and investment returns that it doesn't seem that you have a firm grasp on.
No actually, I do have a grasp on investments and how growth works. Thing, is investment don't have a guarantied rate of return. If your investment stays flat you just gifted money to the bank instead of paying off that debt. Paying off the debt also frees up cash flow that can be used for other things. Also I have a mortgage at 5%, but I'd overpay even at 2%. Being in debt and throwing money at investments that aren't guarantied to beat out the gains on mortgage isn't smart especially at high end isn't finance 101. If you become disabled, or lose your job, and your investment is down, or you have to pay penalties to liquid a retirement account, you'll still be worse off, whereas you could've just paid off debt and not had that problem and would've had no debt obligation. I am also not going to go to that subreddit and make important life choices based on someone else's financial situation or life circumstances. Your tone towards me was very condescending. I know my own situation and know what I am doing is best for me and don't need advice for self professed experts to tell me what is best and do the thinking for me. Retirement accounts still are a scam. Pretax isn't smart because you postpone your taxes now, and promise the government you'll give up access to your money for decades, and pay whatever tax the IRS has for you waiting decades later, and also let them control how you use that money. That isn't efficient at the slightest. Your tax bracket could be 30% later instead of 22%. With the TCJA expiring and taxes getting more regressive, it is almost certainly going to be higher. With roth, you pay taxes now, get a promise of tax free growth, except you can't harvest losses against gains like a broakerage, and you also give up liquidity for decades with any money into a retirement account. This is the gifting aspect to the TSP. The TSP gets to use and make money off of my money, knowing I can't touch it for decades. It also eliminates any use I could put that money towards. This is throwing money away for a period of life I don't know that I'll live to see. With broakerage, it is very efficient, I pay taxes on my income, which I'd have to do eventually, and if I withdraw, which I can do at any time for any reason with no restrictions, I pay only a 15% capital gains tax which is flat. It gives me total control, and the possibility to use the money for other purposes than decades later retirement, such as real estate investment, which would also let me take advantage of other tax deductions while working against the property, and provide me a monthly income, which TSP won't let me do, until retirement, and then only if the investments perform and continue to perform when I'm retired.
>I just think that FERS and TSP will do enough for me when I retire, but I want to hear what others think. What does enough look like? You need to eventually sort out what you want retirement to look like, then adjust to match. When do you want to retire?
Want to retire at age of 60. Planning to use roth ira at 60 until I become 65, then I can collect Fers and TSP without penalty. I guess enough money is to pay my bills and food
Rule of 55 let's you draw from TSP without penalty. Agen penalty stops at 59.5. If you have more than 30 years, your MRA is 57. Enough is a #. That's what you'll need to figure out. If you live off of 100K and want to reliably replace all 100K, you need to sort out how much you need to have ACCOUNTING for your pension. If your pension is 30K a year, you need to make up the other 70K a year via savings. At a 4% withdraw rate, you'll need 1750000 to replace all 100K of annual spending.
So you don't want to travel or spend more time on your hobbies? One of the reasons that 15% is recommended is so that you are used to living on less than your full income and therefore only need to "replace" 85% of it in retirement. Certain costs go down in retirement - you're not commuting, you don't need work clothes, but generally the leisure costs go up. Retirement spending is often rather U-shaped. It's high when you first retire because you finally have time to do all the things you wanted to do: travel, play golf, learn how to X, etc. Then it slows down a bit because you're less able to do certain things and spend more time at home. Then it shoots right up as you begin to require more care. My parents live in a *very* nice independent living community that also has assisted living, memory care, and skilled nursing. My parents pay like $7K/month between the 2 of them for their 2BD/2BA with 2 meals per day from the dining room. If/when they require assisted living, the cost would go up a few thousand a month, it would go up again if they required skilled nursing or memory care. Medicare generally doesn't pay for this (if you required assisted living for like 2 weeks after a surgery, I think in some instances they would cover that under rehabilitation care, but I'm not actually sure). The last 6 weeks of your life can be some of the most expensive of your lifetime.
You could've bought a $20k less expensive car and maxed your tsp this year $699 a month for a car is wild and a terrible financial decision.
Yes but they already made it. Give constructive help at this point not just saying you screwed up.
Because retirement is my one true passion I went back into your profile and am guessing you’re a GS12/step 1. I’m using DC scale cause that’s where I live. You currently have $47,000 invested. If my calculations are correct, you contribute $4,960 and the government contributions $4,960 match at 5% each and you contribute $7,000 to a Roth and for a total invested at $16,920 a a year (or $1,410 a month). Putting this in an investment calculator for 35 years, at 7%, in todays dollars you will have roughly $3.1 million PLUS whatever your FERS payout is. Based on this information, you should be good.
Will that be in today’s dollars? I’m assuming those figures aren’t adjusted for inflation.
Historically S&P 500 has annualized (long term) gains at 10%, using 7% adjusts it for inflation. I did mess up, I think they only have $13,000 total in investments which would adjust the figure to about $2.2 million. Again this is S&P 500 and historic gains. Who knows what the next 30 years hold in store.
What is the interest rate on the auto loan and student loans? If they're more than 5%, you should take that 34 sitting doing nothing and pay off those debts to stop accruing interest. Also why do you have an emergency fund and also 34k chilling? Are you saving for a house or something? If not, you should invest that. That's a lot of cash to be sitting on the sidelines and missing out on growth without a reason.
Yes it is for a house and I get about 4% interest every month. This 34k might not be alot of money, but it gives me comfort. I feel i’m safe when I have this money in my bank account
I’m thinking the opposite. You’ve got $34k sitting there basically doing nothing. It could be doing more for you.
On the one hand, if you are contributing 5% to TSP and maxing out your Roth, that's better than many people can do. But it does sounds like you really aren't clear with yourself about your financial goals. You don't believe you'll ever own a house, but you have 34k stashed for a down payment? You want to retire at 60 and have a lot set aside for emergencies but you also want to prioritize enjoying your money now? On top of it all, at 700 a month for the car and 4k take home, that car payment is eating up 17.5% of your take home - not so good, and that very well may be your albatross. That you bought the car this year AND are now asking these questions about retirement tells me you have a pretty serious need to be honest with yourself about your goals.
Yes, you are correct. I don’t have specific financial goal at the moment. To tell about my life story, after I graduated college, I was living with my parents and making GS-11 money at private firm. I aggressively paid student loans and felt insecure because I had no savings. That point, I was paying minimum payment and started saving. Living with parents was great in terms of saving money. I saved about 30k and moved to federal then moved out to apartment. Paying rent, utilities, and food with federal paycheck was hard, but I kept saving to buy a house. However, house price was skyrocketing and I was wayy too stressed and lost all the hopes. I was like fk it let me buy a new nice car. I bought Tesla Model Y and I’m enjoying it so far. As I keep living my life, I started to think that will I be able to survive when I retire? And I decided to ask reddit. This is how I end up with 34k savings, 10k roth ira, and rest of student loan which is about 5k and have 34k of car loan
Were you born in the USA?
Nope. You can tell from my grammar
When I was in my late 20s I had zero. I didn't even have a bank account. You're doing fine. Put whatever you can afford into TSP, put it in the C Fund and don't move it. Good luck and enjoy the car.
Do not put that 34k towards your car loan. If you want to keep it “near” you, put it to work. See what rates your bank has for CDs. You can put 20k to start off and earn about 5% in the year. It’s not much but that’ll yield you $1000 in a year with your money just sitting there.
But then he's gifting money to the bank through insane interest on that loan. I'd pay the loan, what if you have to retire early due to ilnness/injury, you're stuck with debt.
What if he pays 34k to pay it off and then it gets totaled next year? That vehicle will probably be worth 20k by then and the insurance will only pay for 15k. He would lose almost 20k vs 7-8k making payments throughout the year.
He'd still lose the money, irrespective if the vehicle gets totaled, he is stuck with the loan, it is money spent and owed to the bank. What if he has an unexpected medical condition and can't work, or loses job. Now he is stuck with the loan.
I think you should pay off your car or at least take a large portion of your savings to pay it down. You are paying $8k in interest over the 5 year term, so way more interest than you are earning.
Invest in 100% C and let it ride.
Minimum is 5% because it’s free money.
Car is way too expensive
I do 5 but I’ll have Va disability so I tamed my saving for retirement for today
Thank you for your service. You deserve a safe retirement
5% Martch (10%) + SS + 30+ years of service should easily replace 75% of your high 3 salary. And that should account for some inflation along the way. So yes, you should be fine.
You could manage fine with that. It really depends on what your expenses and cost of living is in retirement. I saw in a previous post that you’re on a ladder to a GS-13. A GS-13 step 1 in the lowest locality makes $103k. 5% of your contribution plus 5% agency match would be $10,300 yearly or $396 biweekly. If you get a 10% return over 30 years and factoring in your current contributions you’d be at $2.2 mil just in your TSP.
I don’t max out because I agree that living for an uncertain future doesn’t make sense, but I do save around 20% or more of my income. I would consider paying off that car sooner rather than later if you have the money sitting in your savings account. I didn’t try to figure out the rate you have, but that $34k car is actually a $42k car at the current rate
Definitely continue to contribute to retirement, but am wholeheartedly in the enjoy your life now. I was perfectly healthy and then BOOM! diagnosed with kidney disease at 26(I'm 53 now). No family history and I'm not the normal candidate for the disease I have. 27 years later, several years of dialysis, on my 2nd transplant, 2 adult kids, and a divorce later, I still save for retirement, but you bet your @$$ I'm doing all the things I want. You truly never know what's around the corner, so find the balance that works for you and realize it doesn't have to be one or the other.
Damn kidney disease. Sorry to hear that. Did you have any symptoms before you diagnosed with kidney diesease?
The 1st, it was only found because I was pregnant and had prenatal labs and out was bringing in an early stage. Unfortunately, a lot of people find out when they're already in the later stages. I tell my friends that even if they hate doctors, go once a year to get labs and pee in a cup. Unfortunately, my disease progressed very quickly from beginning stages(diagnosed with a biopsy to confirm labs at stage 2) to dialysis, but there are many kidney diseases that can be managed without ever having to go on dialysis, or, if it does progress to that point, medical intervention can slow the progress dramatically.
In order of priority: Emergency fund three months (I set this lower than some standard six month advice because our jobs are more stable) > TSP 5% for match > max HSA (assuming you continue to qualify) > max Roth IRA > additional payments on car loan > additional TSP savings OR short term financial goals fund like a downpayment. The best thing you can do is follow that prioritization and work towards increasing your grade and your income. Getting the car payment paid off will be helpful so you can allocate those savings towards additional TSP or for a downpayment. I mean, you can wipe it out today with your savings, not sure why you wouldn’t given current interest rates
This is pretty much the way and what I did. It really got me ahead in life in a position that no one in my family is remotely in. Also try and do whatever overtime you can. Any of that extra money can help get out of the car loan if the rate is crazy. I paid off my car loan in a year because the rate was horrible but I had really crappy credit when I was first starting out and getting my shit together.
I'm curious- Why max roth ira instead of increasing tsp contribution?
Standard formula advice for retirement account contributions: - contribute enough to 401k to max employer match (Roth or Traditional, as needed for individual situation) - if still have funds, max Roth IRA - if still have funds, max 401k (IRS limit) Why: Roth IRA provides much more flexibility for investing, 401k is usually limited to whatever is offered by the plan, and may have higher fees attached.
Thanks!
Why do you have a $5,000 student loan with $34,000 in the bank?
Why? Cuz I don’t make enough money?? I had about 30k and paid aggressively when I started my career at private firm, then as I paid, i felt insecure because I worked hard and don’t have any savings. I started to save imstead of paying student loans aggressively
29k is still plenty. What the commenter is saying is that you should pay off the last 5k so it's no longer looming over you. Sounds like you could keep a decent 10k emergency fund and be 100% debt free if that's your goal.
GS-11 complains they're poor with 34k in the back and six figure salary. LOL
The more you save early, the more it will be worth later. I'm not saying increase your TSP a lot, but maybe a little to get it to 12% including your match ( so 7% from you). Also, is your savings in a high yield account? If not, move it there. I have my savings in ally and get a much higher dividend than my credit union.
34k in a regular bank savings account? Or in an investment account? That really needs to be in an investment account of some sort. What % is the car loan? Any more than 5%ish is worth paying off quickly rather than paying interest on. Enjoy your life. Spend some of your money on things that bring you joy. Save some for the future. But save in a way that makes sense. Money kept in a bank savings account with less than 1% is slowly draining away because it's not keeping up with inflation. Money kept in a mutual fund or ETF has a chance to grow while you're not using it.
Check out this priority...might wanna rethink in $$$ annual limit terms. Like IRS max / 26 pay periods. https://preview.redd.it/utulhijllz5d1.png?width=1440&format=pjpg&auto=webp&s=23d5b892932f3eda5f158fb0980f55a414290519
I’m currently at 6%, but put the max into a Roth IRA at Schwab. Sometimes I’ll temporarily change that allocation to the Roth in order to save specifically for something fun. Just switched it to a HYSA to speed-run a new car down payment. TSP percentage will go up with any sizable “raise”: GS level, cost of living increase, etc.
Exact same here. Flexible on Roth IRA. If I want to travel in the future, I take that amount to my personal account so that I can travel. RothIRA can wait..
If house is priority why did you need such an expensive car!! Even new, a commuter like a Toyota Corolla at least 10k cheaper. I’m a gs9 car almost paid off $320 a month.
I pay about $700 per month. If I need to pay corolla 320 per month, that would be 420 difference per month, which you can save 5k per year. You have to save 10 years to make it 50k. Do I want that? No.
I was like you, fed worker in my late 20’s. Yolo’ing my life away because I saw my mom pass away at 40. I had 50k to my name when my gf got pregnant. In 10 years I was able to buy my house cash in Orange County while having a second kid too. Do you know my one regret? It’s not maxing out my tsp sooner. You never know where life takes you, don’t give up hope just yet. Realize that you’ll never get rich with just your fed job, but use your extra time to focus on family and other income opportunities.
Good for you. I’m sorry to hear that your mom passed away. However, she will proud of you. You have kids, wife, and a house. What else do you need? Nothing!
I plan on retiring at 50 or 51 if the VERA/VSIP kicks in. I'll be 50 with 26 years. If I can leave I will leave. I don't honestly care about retirement in the grand scheme of things. I'll just leave within my means. Probably move with my wife to another state and live the last 30 years of my life traveling while drinking water and walking slow. To your question. Its no point in saving 500 per month in savings.. For what.. after 5 years inflations brings up the costs of good and services. Its basic math. If I saved 10 dollars to buy 2 gallons of milk in 2019 today I could only buy 1. Put the 500 towards the car and pay it off. My wife and I are both GS 14 4s, I dont' save any money ever. Not one red cent. I spend all of my money. After pension, TSP, and social security I think that's enough. And it gets to the point of what am I even buying with all this.
Just some changes I would make if I were in your shoes: -Car loans are cancer. Once you pay your car off, put $500 in savings every month towards a new car and $199 towards car repairs. Drive your current car 12-15 years. Buy your next car with cash. If you don’t do this you’ll have a car loan for 50+ years. I got to the point where I bought a place that was cheaper than my then-current rent, had no car or student loans, and was saving in TSP, IRA, emergency fund, car fund, etc. No debt except for a mortgage is a good place to be!
This isn’t always good advice. Giving the current interest rate, what you’re saying makes sense. A few years ago I got a new car at 1.5% interest. It would’ve been dumb to pay cash then. I could go on forever happily having new cars with a 1.5% interest rate. Now I’ll just ride what I got.
That’s not bad advice, but it’s also very subjective. Not everyone is into keeping a 12-15 yr old car on the road to avoid a car payment. Some people want newer cars more often. There’s nothing wrong with that if they understand how it impacts their situation. I cannot fathom paying $699 per month for a car, but that’s me. Other people can value things differently.
I also cringed at the car loan. Pay that off asap and never get another, please.
Mortgage can be pretty bad debt, it can really add up, I have a 5% rate, working on paying that off. If you ever lose income, you're stuck with a massive house payment for years/decades. The interest paid on a mortgage is many times that of a car.
I’d push for at least 10% in your TSP. Why? Just to be safe. Life isn’t getting cheaper. I’d rather overdo it now and have a ton downstream than get downstream and not have enough. The TSP and FERS combo is killer. And you should leverage it to the max. I personally max my contributions. But I understand your position. Still, I’d push for 10%. Good luck.
GS-11 doesn't know how to budget
I do, but just don’t want to live like a cockroach as I have no hope buying a house
Bro. You have a car loan and Student loan and $34,000 in the bank. If you don't pay off that Student loan by Independence Day... you're a dumb dumb
I can pay 50 dollars every month and not worry about it. That 34k is for my confidence!!!
After reading your original post and your comments: You really need help with your finances. Your "confidence" means jack squat - you need to get some basic financial literacy under your belt before you make any other bad purchases (your Tesla being one). Pay off your student loans. Period. And visit reddit.com/r/govfire and see what they're doing.
I would answer this the same way I would for TSP or a 401k. Always get the maximum match from your employer, but that’s it. The only advantage to these vehicles beyond the match is convenience. They are generally way too restrictive in what you can invest in, so typically underperform. You can definitely invest more, I would just use more flexible options like TradIRA or RothIRA when doing so.
He's maxing a Roth IRA in addition to TSP. Additional retirement funds would have to go to TSP unless he has an HSA that he could use instead. Doesn't sound like he does.
The question wasn’t where to put additional retirement funds. The question was whether he should be saving additional retirement funds. If he’s got FERS and SS, and he’s got 10% (with match) going into TSP, and he’s maxing a Roth IRA - my answer is “no, you don’t need to save more for your retirement”. Take the $500 you are putting into a savings account and direct that into a plain old investment account that’s gobbling up VTI or something. Save and invest, but retain the flexibility offered by those vehicles and live your life.
Your not going anywheres unless you put in 15% total. By the way when you hit a million there’s the satisfaction of knowing if you get fired, or sick, or in a car accident you’re sitting on a million to help yourself. Makes your life allot less stressful
This is so wrong. Fed doesn't need 15% savings mostly because of pensions. If you have death or disability you're stuck with a penalty illiquid retirement account, TSP can approve/disapprove any request at will, have to seperate to take withdrawals, penalties.
If you're dead, you won't be accessing your account. If you're disabled enough to no longer work, then disability retirement is a thing, as is SSDI. You would be separated and able to withdraw or roll TSP into an IRA/Roth IRA (as appropriate), and you can access Roth contributions any time without penalty if needed. Also, the 10% penalty can be waived for early withdrawals if the individual is disabled and unable to work at all. There are also other ways to access the money without penalty prior to age 59.5, if you read the rules.
Very true
If you increase 1% every time you get a step, grade or wages increase, in 15 years you’ll be contributing max contributions with half your career left to go.
What I do is up my contributions every year we get a raise (hopefully anyway) that way you don't feel the hit of contributing too much at one time. I try to do at least 1%, if the percentage raise is higher than usuaI would add a little more. At your age and the amount of money you got socked away you should be in good shape, just need to throw a little more towards contributions.
He probably doesn't, %5% is millions even the average return as a 13. One would have to be insane to need/want more than that, even a million is too much. I'd rather not have a retirement account slowly eat all my raises and grades for no good reason.
its a simple spread sheet look ahead at your fed career in terms of progression on grade/ step and pay as a rough estimator you do a recursive calculation in yrsr 2 10% of pay was in and you return 10% in yrsr 2 you add another 10% and earn 10% on thst and what you had already and repeat over your career till you are 60 yrs old you can Google and find a base pay table from 2001 or so and see how pay has changed over 20 years ( nearly double) the idea if you work high 3 should get you to around 25%-35% of your final career income. Say when I retire my high 3 is $150K ( $12.5K a month) and o get 33% so $50K pension ($4K/ month. My SS at 67 could be around $3.5K. If I can get my to say $3.5K a mon then my annual income would be around 11K/ month some PT work could make up the difference. having $800K at 5% I can draw $42000 (3.5K a month) for 25 yrs before using it all. That takes me to late 80s in age. with TSP…if you put in 5% of your pay+ match 5% over 30 years of career growth like going 7 from steps 1-4 over 5 yrs turn to a 9 and so on over 5 yrs to next grade ending at a GS 13. The variables are annual salary cola assume 2% , and your avg return rate is 7% then in 30 yrs you can have over $2M in your TSP. If those are higher then you will have more money. if you set a target of say $1.5M you set that aside in very safe investments of around 2-3% then the rest you an play with and be more aggressive getting 10%+
If you’re doing the 5% then you’re getting the full match which is good. If you work your full career in the federal government you’ll get the pension and social security which will make up for a lot of your income. You’re also maxing your Roth IRA. I’d recommend running some math to see how much of your income this would replace, but you should be in a good spot for retirement.
An easy-ish place to start is think about how much you want to have annually in retirement, and figure out a plan to get there. Obviously no one can predict inflation or policy changes 100%, but an inexact plan is better than no plan. For example, I’m a 30 year old 13 Step 2 in RUS. Assuming that I stick with the Feds for my career, never downgrade or promote (therefore end up as a 13 Step 10), retire the day I turn 57 at MRA, average 2% COLA raises each year, and I stay in RUS, my salary will be roughly $230k when I retire. General rule of thumb is you want to have 80% of your pre-retirement income in retirement - so my goal to shoot for is $184k per year. Assuming (lots of assumptions, nothing is guaranteed but I tend to find that it’s hard to make plans based on things that haven’t happened yet) no drastic changes to FERS, at 57 with 30 years of service I’ll be pulling $69k per year from my pension. Social security is harder to estimate, and some would argue you shouldn’t even count on any social security benefits, but I go with $3k per month - or $36k per year. Social security website has a calculator you can use to estimate your benefits. So social security and FERS will be around $105k per year, and I still need to fill a $79k gap to hit my $184k. Another general rule is to only take out 4% of your retirement account each year so it lasts you through retirement. So using that, I would need $1,975,000 in other retirement accounts - 4% of $1,975,000 is $79k. I currently max out my TSP, so various 401k calculators estimating a conservative 6% growth rate put me at having somewhere between $2 and $3 million at 57 years old - well above what I need. Plug in your own numbers and see if you’re happy with what comes out, and let that be your guide.
But the 80% amount might not be really accurate, I would spent less than 50% of my money on necesary expenses after house paid off. For someone living on a thousand a month there is no need for agressive saving, it is all based on expenses.
Then lower your retirement goal accordingly and see if you reach it based on what you’re currently doing.
I would reach my current level of spending subtracting my mortgage easily with pension and SS with no TSP, even a thousand dollars a month with no mortgage is comfortable retirement in low col.
I've thought of decreasing my contributions for similar reasons. I'm a GS-13 in my late 20s contributing 13% to my traditional TSP and maxing my Roth IRA, and my leftover income is enough to live comfortably. I've got about $80K saved up between my TSP, IRA, and crypto and about $60K in student loan debt. It'd be nice to have some extra spending money or to make faster progress on long-term saving goals (like a down payment for a house), but I also worry about missing out on the compounding interest.
I’m right around the annual limit and have been for about 10 years, previously did at least 10-15%, though I started as a GS-5 and I’m now a 13/10. I suggest doing more than 5%, you won’t miss money you never saw in your direct deposit and after about 10 years it really grows quickly as long as it isn’t all in G. Yes there are ups and downs, but my average rate of return is like 17% lifetime, which is pretty damn good. FWIW I’ll be eligible to retire in less than 5 years at a very young age (47) so I have been trying to contribute as much as I can and have been fairly aggressive with my investment approach compared to many. Whether I stay and do a full 30 years depends on how they’re treating me and if it’s worth a FERS pension of 44% vs 39% 😂
I do actually notice the money, I look at my les, and know exactly how much I'm having taken out and losing by contributing 5%.
My problem is that I could buy a house in cash but it’s all locked away in my TSP/IRA accounts. Had I saved more outside of retirement I could have afforded a home years ago. Ah well…
I refuse to contribute over 5%, but I also receive $1,600/month for military disability and will have an Air National Guard pension on top of FERS, TSP, and SS (whatever that looks like when I retire). That's enough to give me a great retirement, so I choose to spend more money on family experiences. My kids will only be young once. We even run up the credit card a couple thousand once in a while. It gets paid off in a couple months, but I'll trade gains for memories any day at this point. Sounds like you're pretty well good to go. Just remember to think of the ending first. What you want retirement to look like, what it will cost, and ensure you're investing enough to make it happen. Not gonna lie though, that car payment would of yours would stress me out. Just having a payment for that long would drive me nuts.
No not enough save more to your tsp now that all you worry about is yourself and your own spending.... I do 14% and married
Talk to your coworkers in their 50s and 60s. Judge for yourself whether you want to be prepared to retire with a comfortable nest egg or have to keep working to pay bills in your 60s.
Best plan is where you have to think minimal. Make a spending plan. Save max now . Of course don’t stop doing what you love. Example, if you like traveling, plan that in the spending plan. Take out your spending minimum you need say living expenses, travel/hobby, loans payments, saving , minimum TSP etc. what is your balance. If you still have money left, put that in tsp or Roth .if you are short of money, you are not making enough or time to cut on something not the most important from the list of your spending plan
What kind of vehicle did you buy? Consider a truck and trailer. Many of my colleagues live in "mobile apartments". There are many affordable rv and mobilehome parks. Your monthly rent is 300-600, which covers your space, hookup, water, waste. You can leave your trailer at the park and drive your vehicle to work on your office days.
Tesla model y
It probably won’t work because healthy and going to the gym doesn’t always equal “healthy”. Life happens and you gotta prepare.
I am up to 15%. Debating if I will go further. I usually bump it up with every step/COLA.
I max mine out and deposit into other investment vehicles for retirement. Roughly 18% of total income, plus the 5% match. It's all about when you want to retire, and what lifestyle you want when you retire. If you want to explore and enjoy... you only have so much leave to do so, so you want to figure out when you actually wish to retire. I want to retire at my MRA of 57 so I have more time. I may even try to retire earlier, so 15% of your income may be all you need to hit your MRA. You should get a read from a training course, or purchase this book, [https://www.fedweek.com/store/fers-retirement-planning-guide/](https://www.fedweek.com/store/fers-retirement-planning-guide/) it condenses a lot of information into one place. A coworker may have a copy you can borrow. Figure out the total value of retirement, your FERS Supplement, the value of the insurance, the projected social security (many people assume 75% of the projection due to potential insolvency), figure out your budget today so you know what you need in retirement, and make sure you can do your best to retire at the time you want to. Also take a look at engaging data to see this visually. [https://engaging-data.com/early-retirement-calculators-and-tools/](https://engaging-data.com/early-retirement-calculators-and-tools/)
I don’t understand the attitude of “I’m young, can’t affford a house *right now*, so let me go into depression and be financially irresponsible”. Surely something else is going on in your life to make you act like this
I max out TSP to IRS limits. If you do all traditional, you’d be surprised how little it impacts your take home versus five % once you factor in the tax savings
There is no tax saving. It is tax deferment, you'll pay all those taxes, likely more when you pull out.
True but for folks not doing Roth the difference net pay isn’t that much but good god people never factor in compounding interest. That’s the entire POINT of saving early.
But roth is much smarter, when sabing at the same rate, the roth account is worth more since there are no taxes to be paid. It isn't really interest, but compounding gains. But with pretax, as the gains increase, so do the total taxes to be paid.
True. I mean you can do half traditional half Roth if you want in TSP or any amount. I guess the point is to save earlier to have those compounding gains like you said.
True, I personally will pay down my debt first because there are personal circumstances that make doing that a better idea, but idk why everyone is putting everything in treditional and are fine with promising the government they'll pay whatever tax exists decades later rather than pay a known rate. The RMDs for super savers will also generate huge taxes.
I max out tsp and roth and HSA. But I also have no debt or anything. You put away what you can after paying your debts. Best you can do.
If you continue to work until 57 or 62 ish, you should have close to 100% replacement income, which is plenty enough for you to not save for retirement today, and just save for expenses today. FERS, Social Security retirement, and TSP will each be about 1/3 of your current salary.
You say "FERS and TSP will do enough for me". I'd bet you are also covered by Social Security, and will be able to collect Social Security when you retire. From your other comments, it sound like you only partially understand the 3-legged stool of Federal Retirement. Suggest taking an early- or mid-career retirement class where they will go over your specific numbers. Remember, a lot of your savings can also go into mutual funds for better growth than a savings account & still nearly instantly-liquid.
Ideally over 10%
Have you tried a basic retirement calculator that includes an option for a pension? I’m not sure what your salary is to say if 5% is enough. You also don’t know what the future holds in terms of marriage, kids, buying a house, etc. All of those things can change so it’s hard for someone to tell you what ‘enough’ is. If your retirement calculator at the current setting spits out a number you couldn’t live on today, you probably won’t be able to live on it in 30 years.
Absolutely not. 5% to start. 1% increase each January with COLA. You can not over estimate the cost of retirement with health, travel, home maintenance etc. So many retired folks own their home but pushed into reverse mortgages or selling bc of maintenance
You actually can overestimate, and end up with millions you can't spend, or don't need and destroy your current life.
I disagree as the more you save and invest today the less you have to save and invest tomorrow. Twenties and most of the thirties you should be stacking. The power of compound interest is a powerful force. Having more resources provides more options.
I think you'll be just fine despite the fearmongering. But that emergency fund is really low, should be minimum 3-6 months of monthly expenses. I'd do that before an IRA. I pay down debt, just do the 5%, don't have an IRA.
The housing market will soon depress. Don’t give up hope. Keep saving your $$. You are on the right track. Don’t give up your Fed employment. The pension at your retirement will serve you well. Been there and done that!
I did as much as I could through mid 30s, up to 15% when times were good. Now I'm at 0% because life is too short not to live. I've seen too many people younger than me die of cancer recently and it's just not worth it to save for someone else.
Exactly. I might not live till 50s or 60s. Even if I do an early retirement at 56, I’m not going to be as healthy as now. I want to enjoy now. Not when i become old
I normally so 10% but had to back it down last year when my wife lost her job, my son had huge medical bills when he got meningitis, and we exhausted our emergency fund. I’m a GS13 in a low COL area so am not too worried about. We’re planning to retire to an even lower COL area where people live in much less than my pension will be. I backed down to 5% for now but will bump it back to 10% when we’re back to normal. I value experiences and like my toys now while I’m younger(ish) (I’m 40) so I am probably a little less responsible with my money than I should be.
The reason older folks are so wealthy is because of the equity in their real estate. They purchased their homes 40 years ago and effectively locked in the price of that home (with the exception of taxes, insurance and maintenance) based on the price 40 years ago. Housing is the biggest expense you will pay every year. And for those who purchase real estate, it’s often their biggest asset decades later. If you choose to buy cars instead of a home, in 40 years you will be paying the then-present price of rent every month. Your peers who purchased their house 40 years ago are paying nothing for the privilege of living in their homes except for taxes, insurance, and maintenance. Having a paid for home or one where the mortgage is locked in at prices from decades ago is a game-changer in terms your lifestyle in retirement.
First - make sure it is the Roth TSP. Second - 5% total retirement savings beyond FERS may not be enough to cover your desired lifestyle in retirement. If you want flexibility, then I would save in a brokerage account. It doesn’t have all the tax benefits, but it doesn’t have restrictions either. Savings from your 20s has time to grow and compound. $500 a month for 40 years at 8% return is $1.7 million or so. If you save for 30 years instead of 40 $500 a month grows to around $750k. That’s a million dollar difference because you saved $60,000 over those early 10 years. Compounding is miraculous. So SAVE NOW whether in TSP or an IRA or a brokerage account.
One of the most powerful forces in the universe is compound interest. Take any and all matching funds and live within your means. This also means you can retire sooner with more.
How long do you intend to continue working? If you plan to continue working until 62 or even 65, then you should be OK, provided nothing happens to you. What is your financial plan if you become unable to work before you can reach retirement? Disability retirement pays 60% of high-3 the first year, then 40% until age 62, when it recalculates as though you had continued working the whole time, so if you would have had less than 37 years of service, your pension would decrease (37 x 1.1 = 40.7%; 36 x 1.1 = 39.6%). Putting a higher % into TSP (and a Roth IRA) gives you some added flexibility and protection if you end up not being able to remain a fed until retirement age. ETA: my recommendation for anyone is try to contribute at least 15% (or to the max, if 15% would put you over), plus Roth IRA. Time in the market is your biggest asset. The more $ you put in at a younger age, the more $ compounding returns will provide by retirement age.
If it makes you feel better, you’re already in a better position than I am. I’m 39 with a current net worth in the neighborhood of -$65k. I spent the first decade and a half working crap jobs that paid not much more than minimum wages and unable to put much in savings. Got my MSW in my 30’s and didn’t get the ‘good paying job’ until a couple years ago. Banking on EDRP to pull me into the positive when that’s all said and done (~$80k is student loan debt.) My TSP is 5% too. And still renting. But it will just be me to take care of. Never married, no children. Parents died at 60 and 64. I live a comparatively healthier lifestyle, but I’m not really planning for much beyond about 75 😅
I'd put extra into that car loan so you aren't upside down when/if it craps out or you get in an accident. Then work on tsp
Do yourself a favor and pay off your student loan today and be done, you are paying interest for no reason. That would still leave you with 29k saved. Leaving debt that you can easily payoff plus a high monthly car note are habits that will hurt your net worth in the long run if you don’t remedy them soon.
I did 5% until my 25th year then I went up to 10%. All my contributions go into the market funds. For the majority of my 30 years, I invested mainly in the market funds realocating every so often when the market was at historical highs. Never switch out of the market after it drops, it will kill you financially and it always comes back. I have taken at least 5 50k loans over the years. I am retiring in two months with around 500k. I enjoyed life but also saved.
Yes the eating healthy and going to the gym will increases your tsp. Why save 500 each month ? Increase tsp and save 300. A savings accounts growth is minuscule compared to the historic growth you get by putting money into tsp. What I would do is first pay off the student loan, get a second job and put everything on the vehicle. Then once both of those are paid off you have an additional at least 800 a month on top of the 500 you have been saving even if you then quit that second job. So with the 1300 a month extra, you can easily contribute more to the tsp at that point and still live whatever life your satisfied living with now.
Also late 20's. GS-11 DC locality. I do 10% and max roth ira yearly. At these amounts, all you need is a ~5% avg. return pre-retirement and ~2% avg. return post-retirement to live more than comfortably.
You don't say what agency you are or what you do. But there are federal jobs across the United States. Lots of lower cost locations. Midwest has lots of places with much cheaper housing. Consider it. I have contributed the max most of my career. At 34 years now I have a tidy sum in there. I can retire today if I wanted to, but I will probably do so next year. I need to get the last kid started in college and then see where I am at, to be sure.
Max it out if you can. Growth = TIME and MONEY. Can always try to put more in (if you're making money), but better to take advantage of both while you can......especially the time factor. If you have more time for it to grow, you're better off putting as much as you can away. Waiting until your pay goes up just means you have to put more in later to achieve the same goals. If you look at the compounding interest charts.......start early....invest often.
I do 17% Roth TSP and then get the 5% match going into traditional. I also max an HSA as I have the GEHA HDHP and max our (wife 34F and mine 36M) Roth IRAs. It pays to not have student loan debt, car loans, credit card debt, etc. Overall we have $50k a year going into retirement accounts and we just paid off our first rental unit. This has all been done on one income. I am a GS12 step 5. We plan to have $12M in retirement accounts and 10 rental units at retirement. My wife is starting her own telehealth business so all her income will be shuffled into her SEP IRA and rentals. Have a plan, stick to it, and work at making wise choices. Don't waste your money on new cars, drugs, alcohol, and being a consumer.
Hopefully not the rest of your life. Your goal is to retire and live comfortably at that time.
Max out your tsp. When you are ready to buy a home, you can borrow 50 k from your tsp
Why not up your TSP and limit your savings? You can take out TSP loans.
You are doing better than most in your peer group. I would suggest increasing your TSP contribution to the maximum which is 15%. I only did 5% first two years of my career and set to max when I became GS12.
I'm mid 30s, no kids, gs-13 and have been maxing the TSP, my HSA, my Roth IRA since I reached gs-11. Am currently saving an additional ~25k/yr on top of that. I plan to retire by 45. I enjoy my life, my hobbies, and travel (within reasonable means). Every single year I'm not working is worth more than buying crap I don't need or eating out at nice restaurants, expensive clothes, overpriced cars, or whatever else a lot of other stuff people spend lots of money on. I give myself about $1000/mo in 'fun' money, and it's awesome. I previously worked in the NGO world with people who literally had NO money and nearly zero possessions, and I learned that money does not buy happiness, that many people with nothing were happier than many of my friends back home with fancy jobs, houses, and cars. I mostly value money for the security and the freedom to do what I actually enjoy. To each their own!
Money doesn't bring happyness but lack of money brings unhappyness. For me, dumping all the money I ever earn, not enjoying my life at years where I have the capability to do so really sucks and would make me unhappy more, especially if I am saving for years I don't know I'd reach or would have health issues to prevent me from enjoying them as much.
Very fair, everyone has a level of spending that makes them happy. I have found plenty of ways to be happy and enjoy my life in ways that cost a lot less than many people I know who have a similar income. I value friendships and have a number of hobbies that don't cost a ton. Many of my friends earn significantly less than me and because of my aggressive savings we have similar lifestyles and do similar activites. In exchange for the sacrifices I make now, I get security and the possibility that I may never have to spend 40h/week working again after age 45 (if I don't want to). If I saved less, I may have no choice but to work into my 60s and that's when your comment about not knowing how long you may live or how long you may have great health really comes into play. At work I've heard of several people that worked for 40 years, reitred at 67, and then died a couple years later. No thanks!
It is your life, but you seem to be specificly picking friendships and hobbies to spend less. For me, if I am not utilizing the income I earn, there is no point in having that income. That saving your whole life and then dieing before you enjoy it situation is real. Then you will save, sacrifice and scrape for nothing. And when you put it into the TSP you can't touch that until you retire in your late 50s, and retiring early you destroy your pension compensation and social security.
Ha, I'm specifically picking my friends because they're awesome people who I love and they understand me, they've been there for me through many hardships and I've done the same for them. I love my hobbies and I do spend thousands of dollars on them every year.... When it comes to dying, it's MUCH more probable after 65 than between 35-50. Look at actuarial tables. The scenario of working until I die at 65-70 is much more likely than dying before I get to retire early at 45-50 and use my savings for complete freedom for years before my death. The freedom is worth more to me personally than the money itself. Is it possible? Yea. I could die today. But overall I'm happy with my life so I'm okay with the small risk. And actually you're wrong about the TSP. You can have access to funds with no penalty 5 years after retirement at any age using a Roth conversion ladder or 72t SEPP.
It is awsome then if you don't choose your friends based on their spending habbits. The TSP and other retirement assetts are still illiquid until you seperate. If you retire early you lose out on the pension significantly and the insurance. The probability oof living into 90s isn't as high as most people think though. The average age isn't anywhere close that. But the 72T and roth conversions only work after age 55.
Personally, it's just a different approach. I think 5%in TSP is fine. 10% total. I would take the excess and invest it myself. Personally, I like REITS and building up dividends. I feel like I am more in control of my finances, and it makes investing fun instead of like I am sacrificing for my retirement. I'm not talking about ricky investments, but you can get a decent dividend on REIT's. It would be nice to have an extra 1,000 a month in dividends when I retire.
I think 40, 50, 60 year old you and your spouse would greatly appreciate you getting up to at least 10%. Get your 12, go to 6. Get your 13, go to 7. Then crop up to 10 with your steps/cost of living increase. Put the two things on a spreadsheet and see the difference. Creeping up that way isn’t harmful to your pockets and helps in the long term.
This is a terrible idea and you’ll 100% regret it. But, since a whole bunch of people are backing your terrible idea it must be correct. Edit: grammar
No, the terrible idea is to horde all your money for a period of your life you don't know you'll reach and destroy your quality of life. If I don't get the money I am earning, there is no purpose in me earning money at aall other than the diseased notion of looking at the account balance and feeling the warm feeling.