Max out 401k or TSP

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Topic Author
Jimmybradford
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Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 12:28 pm

Hi all,

I am in the Air National Guard and have been called up for active duty for a year plus. I will be receiving differential pay from my civilian company along with my military pay.

Now my question is do I max out my 401k with my civilian employer with 4% match (can do also do after tax contributions) or max out my TSP.

My current 401k is with Empower and I have the following funds:

Broad Market Bond Index Fund 20.00% 0.07
S&P 500 Indexed Equity Fund 65.00% 0.06
Global Equity Fund 15.00% 0.68

My TSP
G Fund Government Securities 10.0%
F Fund Fixed Income Index 10.0%
C Fund Common Stock Index 64.0%
I Fund International Stock Index 16%

Any help would be helpful. Let me know if you need more information.

Thanks
Last edited by Jimmybradford on Fri Jun 14, 2019 2:40 pm, edited 2 times in total.

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Tyler Aspect
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Re: Max out 401k or TSP

Post by Tyler Aspect » Fri Jun 14, 2019 1:21 pm

Empower is a subsidiary of Great-West Life & Annuity Insurance Company. It is probably better to max out the TSP.
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lakpr
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Re: Max out 401k or TSP

Post by lakpr » Fri Jun 14, 2019 1:26 pm

Better to max out TSP, their expense ratios are rock bottom. Since your employer 401k offers after tax contributions ability (and presumably In Plan Roth Conversions), may be you want to switch contribution in employer plan to after-tax, then convert to Roth. TSP does not allow after tax contributions to their plan.

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 1:55 pm

I forgot to mention that my civilian company does a 4% match

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LinusP
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Re: Max out 401k or TSP

Post by LinusP » Fri Jun 14, 2019 1:59 pm

lakpr wrote:
Fri Jun 14, 2019 1:26 pm
TSP does not allow after tax contributions to their plan.
This is incorrect - TSP has offered a Roth contribution option since 2012. You can't do in-plan Roth conversions in TSP, but that's a different animal.

Small Savanna
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Re: Max out 401k or TSP

Post by Small Savanna » Fri Jun 14, 2019 2:14 pm

Do some of both - take full advantage of the employer match on the 401k, and the rest in TSP

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 2:18 pm

Small Savanna wrote:
Fri Jun 14, 2019 2:14 pm
Do some of both - take full advantage of the employer match on the 401k, and the rest in TSP
That's what I'm leaning towards with maybe some post tax contributions.

ExitStageLeft
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Re: Max out 401k or TSP

Post by ExitStageLeft » Fri Jun 14, 2019 2:18 pm

If all other aspects are equal, you probably have much lower fund expense ratios in the TSP. My wife has a 457(b) plan with Empower and it has some reasonable index funds with low fees but nowhere close to the TSP rates.

If you provide us the expense ratios on those Empower funds we can give you more helpful advice.

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Wiggums
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Re: Max out 401k or TSP

Post by Wiggums » Fri Jun 14, 2019 2:28 pm

Small Savanna wrote:
Fri Jun 14, 2019 2:14 pm
Do some of both - take full advantage of the employer match on the 401k, and the rest in TSP
+1

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 2:41 pm

ExitStageLeft wrote:
Fri Jun 14, 2019 2:18 pm
If you provide us the expense ratios on those Empower funds we can give you more helpful advice.
Broad Market Bond Index Fund 0.07
S&P 500 Indexed Equity Fund 0.06
Global Equity Fund 0.68

9liner
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Re: Max out 401k or TSP

Post by 9liner » Fri Jun 14, 2019 2:48 pm

Is your call to active duty in a designated combat zone or are you remaining CONUS?

If you are headed to a combat zone, you would, in theory, be eligible to max both based on the TSP's annual additional limit of $56,000.

https://www.tsp.gov/PlanParticipation/E ... imits.html

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 2:50 pm

9liner wrote:
Fri Jun 14, 2019 2:48 pm
Is your call to active duty in a designated combat zone or are you remaining CONUS?
Staying CONUS

ExitStageLeft
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Re: Max out 401k or TSP

Post by ExitStageLeft » Fri Jun 14, 2019 3:33 pm

Jimmybradford wrote:
Fri Jun 14, 2019 2:41 pm
Broad Market Bond Index Fund 0.07
S&P 500 Indexed Equity Fund 0.06
Global Equity Fund 0.68
I would continue contributing in the 401k up to the full match. I would then fully fund the Roth IRA. Then max out the remainder of the $19k annual contribution in the TSP in tax-deferred.

I would also drop the Global Equity Fund in the 401k. If there's enough room in the TSP I would have it hold the bonds and international. Assuming equal value between the 401k and the TSP the portfolio would look like:

401k
50% S&P 500 Indexed Equity Fund (0.06%)

TSP
10% G Fund Government Securities (0.04%)
10% F Fund Fixed Income Index (0.04%)
20% I Fund International Stock Index (0.04%)
10% S Fund Small Cap Stock Index Fund (0.04%)

That brings your overall fees down to around 0.05%. The idea is to keep the bonds and international in the TSP where the fees are lowest. Then fill up the 401k with the large cap fund. You finish off with the small cap in TSP to get close to a total stock market weighting. If the 401k balance is much greater than the TSP then put some bonds in the 401k as well.

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 3:40 pm

ExitStageLeft wrote:
Fri Jun 14, 2019 3:33 pm
Jimmybradford wrote:
Fri Jun 14, 2019 2:41 pm
Broad Market Bond Index Fund 0.07
S&P 500 Indexed Equity Fund 0.06
Global Equity Fund 0.68
I would continue contributing in the 401k up to the full match. I would then fully fund the Roth IRA. Then max out the remainder of the $19k annual contribution in the TSP in tax-deferred.

I would also drop the Global Equity Fund in the 401k. If there's enough room in the TSP I would have it hold the bonds and international. Assuming equal value between the 401k and the TSP the portfolio would look like:

401k
50% S&P 500 Indexed Equity Fund (0.06%)

TSP
10% G Fund Government Securities (0.04%)
10% F Fund Fixed Income Index (0.04%)
20% I Fund International Stock Index (0.04%)
10% S Fund Small Cap Stock Index Fund (0.04%)

That brings your overall fees down to around 0.05%. The idea is to keep the bonds and international in the TSP where the fees are lowest. Then fill up the 401k with the large cap fund. You finish off with the small cap in TSP to get close to a total stock market weighting. If the 401k balance is much greater than the TSP then put some bonds in the 401k as well.
Thank you so much. The 401k is about 10k lower than my TSP. I will definitely look at doing this allocation.

user9532
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Re: Max out 401k or TSP

Post by user9532 » Fri Jun 14, 2019 3:58 pm

Doesn't TSP give a 5% matching contribution? So, wouldn't that be a better option?

lakpr
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Re: Max out 401k or TSP

Post by lakpr » Fri Jun 14, 2019 4:00 pm

LinusP wrote:
Fri Jun 14, 2019 1:59 pm
lakpr wrote:
Fri Jun 14, 2019 1:26 pm
TSP does not allow after tax contributions to their plan.
This is incorrect - TSP has offered a Roth contribution option since 2012. You can't do in-plan Roth conversions in TSP, but that's a different animal.
I wasn’t talking about Roth TSP, but about making after-tax contributions (similar to making contributions to non-deductible IRAs).

Topic Author
Jimmybradford
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Re: Max out 401k or TSP

Post by Jimmybradford » Fri Jun 14, 2019 4:03 pm

user9532 wrote:
Fri Jun 14, 2019 3:58 pm
Doesn't TSP give a 5% matching contribution? So, wouldn't that be a better option?
No TSP contributions for my TSP.

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LinusP
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Re: Max out 401k or TSP

Post by LinusP » Fri Jun 14, 2019 5:25 pm

lakpr wrote:
Fri Jun 14, 2019 4:00 pm
LinusP wrote:
Fri Jun 14, 2019 1:59 pm
lakpr wrote:
Fri Jun 14, 2019 1:26 pm
TSP does not allow after tax contributions to their plan.
This is incorrect - TSP has offered a Roth contribution option since 2012. You can't do in-plan Roth conversions in TSP, but that's a different animal.
I wasn’t talking about Roth TSP, but about making after-tax contributions (similar to making contributions to non-deductible IRAs).
Got it - apologies for the "incorrect correction." :sharebeer

MotoTrojan
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Re: Max out 401k or TSP

Post by MotoTrojan » Fri Jun 14, 2019 5:31 pm

Bond and S&P expenses in 401k look fine but drop the global, that’s a ripoff. Look at your portfolio allocation as one big pie and hold international elsewhere.

petulant
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Re: Max out 401k or TSP

Post by petulant » Fri Jun 14, 2019 5:34 pm

MotoTrojan wrote:
Fri Jun 14, 2019 5:31 pm
Bond and S&P expenses in 401k look fine but drop the global, that’s a ripoff. Look at your portfolio allocation as one big pie and hold international elsewhere.
Exactly...double the amount in the TSP, cut it out of 401(k).

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grabiner
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Re: Max out 401k or TSP

Post by grabiner » Fri Jun 14, 2019 9:15 pm

MotoTrojan wrote:
Fri Jun 14, 2019 5:31 pm
Bond and S&P expenses in 401k look fine but drop the global, that’s a ripoff. Look at your portfolio allocation as one big pie and hold international elsewhere.
And hold bonds in the TSP as well; the 401(k) bond fund is essentially equivalent to the TSP F fund, but you have the G fund which has no risk.
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