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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76079  
Subject: Re: investing for retirement!! Date: 9/6/2011 9:50 AM
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I will get a Pension in 25 years (hopefully)

At your age, I think you are counting a lot of chickens before they hatch by counting on a full pension in 25 years. I'm guessing (because of the 'TSP') you are a Federal employee? Given the situation that the Federal government is in, there could very well be significant cuts/buyouts/a change to making contributions to your defined contribution plan (TSP) instead - just like there has been over the last 20 - 30 years in the private sector.

That will be the Max % i can get.

Even if you are at the max % at age 50, will the base that the % is applied to increase after age 50? (assuming that the pension terms haven't changed) If so, you will need to determine if it's worth it to work a few years longer - the combination of not having to fund x years of retirement, plus increasing the base by x years of salary may be substantial, and make a significant difference in your retirement lifestyle.

Since i will be 50 i can't touch my TSP/401k OR IRA till 59.

As already suggested, there is the 72(t) exception.

Also, for 401(k)s, you can access your money with no penalties if you leave your employer in or after the year you turn 55, so if that rule applies to the TSP, that might be another argument for working 4 - 5 years longer. If that exception is not applicable to the TSP (you need to check with a tax advisor), you could 'retire' from your government job, roll the TSP into a 401(k) at a private sector employer and work for another 4 - 5 years, and then access the 401(k). You do need to work until you are at least 54 - depending on when during the year your birthday falls - if it's in January, you will be nearly 55.

Then a few more years after that till Social security( Again hopefully still there)

Well, I'm a lot older than you, and I'm not counting on Social Security as it exists today in order to fund my retirement. I'm guessing that I'll probably get something from SS, but either substantially means tested, or with some other cut in benefits. At your age? Even more changes, IMO.

So i was debating starting a regular brokerage account and then funding when i max my IRA out and buy dividend stocks in 500-1k increments. Dividends are taxed at a lower rate so the tax burden shouldn't be too bad.

IMO, given today's tax structure, it's best to have taxable accounts, tax-deferred (TSP/401(k)/IRA pre-tax) accounts and tax-free (Roth) accounts. Whether that will still be true in 25 - 30 years....who knows. But it's not a bad idea to have a taxable account, since there are few restrictions and more flexibility.

But, at your age, getting the rest of your financial house in order (consumer debt paid off, emergency fund started, etc.) is more important than starting a taxable brokerage account.

AJ
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