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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75776  
Subject: Re: retirement suggestions Date: 6/6/2005 5:11 PM
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first of all thanks to everyone who will offer me any suggestion. i am just trying to get a few more ideas for my retirement savings. a little info about me to i am a 25 y/o officer in the Army, just hit my 3 year mark) will pin captain in the next 2 months or so. my question is two fold, 1)how should i allocate my extra money from hitting the 3 year mark and captain (which will total to 900/month) and 2) i want to look at the level i am funding the TSP since it is not matched for uniformed personnel.
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Hi Vinny...

My first thought was that your portfolio looks like it is pretty much all over the board. Being an Army Officer, you know how important a good plan is, so that's where I would start. Trying to manage as many different investments as you have can be a little burdensome.

Your primary objective in establishing a good plan is to know the reason/s you are investing. Your post states that you are saving/investing for your retirement in XX years, so that is pretty much taken care of.

The next element of your plan should determine how risk averse you are so that you can begin to put together your asset allocation - your ratio of stocks to bonds and what form each will take. In my opinion - this is very important. At your young age, most would tend to invest much heavier in stocks/stock funds then bonds/bond funds and there is certainly nothing wrong with that. Personally, I would not think it wise, however, to totally eliminate bonds no matter how young a person is as they tend to be a stabilizing factor in a portfolio.

Next, deciding what investment vehicles (401k, 403b, TSP, RIRA, TIRA, Taxable, etc.) to utilize to hold the various portions of your investments in. I believe we all have a responsibility to pay what we owe when it comes to taxes, but I don't want to pay one penny more then that. So, it is important to place your most tax-inefficient investments (Bonds, REITs, TIPs, etc.) in 401ks, 403bs, TSP, TIRAs and similar accounts). After they are full, go to your Roth IRA and finally for your most tax-efficient investments (Stock Index Funds, Tax-Managed Funds, Tax-Exempt Bonds, EE & I Bonds) go to a taxable account. Remember that costs and taxes are the two biggest enemies of a successful investment plan. (A note to remember - You can have as many combinations of TIRAs and RIRAs as you want, but the combined total cannot exceed the particular year's total dollar limit. I think that for last year it was $3,000. It also has to be earned income. I'm not sure how your combat tax exclusion works in this area).

The next thing I believe I would do would be to take another look at how well you are utilizing the TSP. I know that, at the present time, it doesn't offer matching to military personel, but it is as close to a good 401k as you can get with additional advantages like the "G" Fund where your principal is guaranteed. How many guarantees are there in life? This is a great investment vehicle, again, in my opinion. I wish that they had this around when I was active on duty. (On second thought, I probably would have been too ignorant to take advantage of it). I believe now that the cap (10%) has been taken off and that 401k rules for contributions now apply (I believe the limit for this last year was $14,000 - Don't quote me on this).

Anyway, taking what you now have and working it into a new allocation plan may be kinda difficult, but workable if that's what you want to do. I'm also pretty sure that what I have suggested is not new to you, but just a reminder of what you already know. I wish you the best of luck whatever you decide to do.

Keep your head down and your guard up! We want you back!!

Best regards,
Bill






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