What to do after I MAX my TSP & Roth IRA?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
JourneytoFreedom
Posts: 3
Joined: Fri Jan 14, 2022 2:35 am

What to do after I MAX my TSP & Roth IRA?

Post by JourneytoFreedom »

Hello,

Just turned 35, currently in the military and I’m trying to figure out what to do after I max out my TSP ($20,500) and Roth IRA in VTSAX ($6,000). I will be maxing out both funds for the next 3 years to play catch up since I didn’t invest :oops: in retirement until recently after I came across the Simple Path to Wealth by Collins. I wish someone would have taught me this a bit younger but I will definitely be teaching this to my kiddos.

I currently rent a townhouse but would like to purchase a home with my VA loan since I’ll be retiring out of the military in three years. Below is a snapshot of where I stand now. I’d like to save about $160,000 for a down payment. But I’m not sure where I should be parking that money. I currently have it in a Money market savings account. Should I just park that money in the savings account, taxable VTSAX mutual fund or other fund?

Any guidance is much appreciated!

Financial Snapshot
No debt
Paid off Prius
Money Market Savings (.45%APY) $20,000
Emergency Fund $30,000
TSP $33,000
VTSAX Roth IRA $50,000
Fidelity (Stocks) $33,000
Treasury Direct Bonds $24,000
Doc7
Posts: 592
Joined: Fri Aug 24, 2007 12:55 pm

Re: What to do after I MAX my TSP & Roth IRA?

Post by Doc7 »

Down payment money can only go in money market, high yield savings account, checking account, or I Bonds. No money you need in less than 5 years in equities.


What is your savings rate % going into TSP and Roth as a percent of gross income, and how many years worth of income do you currently have saved?

$160K down payment for a house seems fairly steep to me…!
Topic Author
JourneytoFreedom
Posts: 3
Joined: Fri Jan 14, 2022 2:35 am

Re: What to do after I MAX my TSP & Roth IRA?

Post by JourneytoFreedom »

Currently, savings rate is 58% (TSP+Roth IRA/Gross Income).
I have about $83,000 combined in the TSP/Roth IRA. In Oct 2020, I started to be more intentional about my investments and felt like I was behind. With a solid budget, I should have at least $162,500 in TSP/Roth IRA by the time I retire and will continue to max out the Roth IRA and hopefully a 401K depending on where my career path takes me.

Just wondering what’s the smart move when saving for a house. I’ve been listening to Dave Ramsey a lot and I think the peace of mind without having to worry about mortgage debt is a great goal.
mustang11
Posts: 19
Joined: Thu Nov 11, 2021 8:58 pm

Re: What to do after I MAX my TSP & Roth IRA?

Post by mustang11 »

JourneytoFreedom wrote: Fri Jan 14, 2022 8:57 am Currently, savings rate is 58% (TSP+Roth IRA/Gross Income).
I have about $83,000 combined in the TSP/Roth IRA. In Oct 2020, I started to be more intentional about my investments and felt like I was behind. With a solid budget, I should have at least $162,500 in TSP/Roth IRA by the time I retire and will continue to max out the Roth IRA and hopefully a 401K depending on where my career path takes me.

Just wondering what’s the smart move when saving for a house. I’ve been listening to Dave Ramsey a lot and I think the peace of mind without having to worry about mortgage debt is a great goal.
First off, thank you for your service.

I followed Dave for a while too. He teaches good stay out of debt practices, but not a fan of his investing approach. I say follow Dave until you get to his investing steps, and then follow Bogle (which is where you are since you're debt free, emergency fund in place, and saving for a home).

Agree with Doc7, any major known purchases within the next 5 years stay out of the market. Keep it liquid at the bank or I Bonds.

I'd put 20% down on a 15yr fixed rate (2-3%) mortgage where the total monthly payment is no more than 25% of your monthly take home pay. This'll keep you from buying too much house. Invest the rest. I understand the peace of mind component, but does it give you piece of mind to throw so much at a guaranteed 2.5% mortgage when you could throw it at an average 8% return on equities? I'd take the upside potential on equities all day, especially at 35 when you have ample time to recover from any market downturns. A paid for house is a great goal to have going into retirement (60s+). Not so much in your accumulation years.

I'd also question if your $30k emergency fund is a bit too high. For example, I have a wife, two kids, and a mortgage and we maintain $22k to cover 6 months. You might be a bit cash heavy there, and could allocate a bit to your down payment savings?
"An investment in knowledge always pays the best interest." - John C. Bogle
Topic Author
JourneytoFreedom
Posts: 3
Joined: Fri Jan 14, 2022 2:35 am

Re: What to do after I MAX my TSP & Roth IRA?

Post by JourneytoFreedom »

I think your right I’m definitely going to reevaluate my emergency fund. It’s just me and two kids so I will probably drop it down to $20K and put the $10K towards the down payment on the house. Thank you for the guidance!
MichDad
Posts: 701
Joined: Sat Apr 20, 2013 3:50 pm

Re: What to do after I MAX my TSP & Roth IRA?

Post by MichDad »

OP,

You're only three years older than I was when I began investing for retirement in 1987. Perhaps this link about the growth of my TSP account will inspire you. Don't give up or take your eyes off the prize -- a secure and comfortable retirement. Our retirement portfolio today (TSP + IRAs), after lots of spending, is about 25 percent higher than it was when I retired on March 31, 2018.

viewtopic.php?p=4777349#p4777349

Good luck and thank you for your service.

MichDad
Post Reply