Recently I went to work for the feds and have access to a plan that is sort of like a 401, called a Thrift Savings Plan, but my only fund choices are all index funds. 1)I'm allowed to contribute 14% ($5762) this year and 15% ($6174) in 2005 to the TSP. 2006 is limited to IRS annual limits. I know the limits vary between 401/403/457 plans, but I cannot find anything for the limits for TSP? 2)My agency will match up to 5% of my salary into the TSP. Does the matching contribution count toward the IRS limits?3)My wife contributes 13% ($6630) to a 403(b) and is matched by 7% by her employer. What is the max she can contribute? We're happy with her funds and are not wanting to make any changes here.4)If I contribute the max allowed into TSP, can I still contribute to a traditional IRA and get the tax benefits? The literature I got from the TSP is a little vague.I became increasingly fed up with the poor results and high fees of the mutual funds that my previous employer allowed me access to in our plan and I am not particularly thrilled with placing my entire retirement into index funds, especially in light of this commentary about index funds… http://www.fool.com/news/commentary/2004/commentary04072001.htm. I'm contributing to the TSP to get my free money, but I would like to maximize my contributions into a traditional or Roth where I have more control and selection. Basically, I'll be contributing 5% per year (the $$ amount will go up with raises) + 5% match. My wife will continue to contribute 13% + the 7% per year (also increasing with raises). How do we get the balance of what I want to contribute ($7000 per year) into a traditional or Roth IRA thru some combination of accounts in my name and/or hers?Stay safe-Talbot
1. I'm not familar with the details of the Thrift Savings Plan but my understanding is that the contribution limits would be controlled by the plan and the IRS reqirements and I believe that the limits will be the same as for a 401k. The IRS limit for 2006 will be $15,000 plus an additional $5,000 for those over 50 years of age.2. Employer contributions do not count toward the contibution limits.3. http://news.morningstar.com/pdfs/TaxActTimeline2003.pdf will provide the contribution limits for the next several years assuming the feds do not change any of the provisions.4. I suggest you check IRS Publication 590 to see the conditions under which you can contribute to a IRA.I have heard a lot of positive things about the TSP and I think you could do a whole lot worse than using index funds in retirement accounts. I would suggest you do some more reading about index funds including some of the online debates on the Fool message boards regarding the recent Fool article that you referenced. http://boards.fool.com/Messages.asp?mid=21084913&bid=100111 might be a place to start.Bob
I am not particularly thrilled with placing my entire retirement into index funds, especially in light of this commentary about index funds… http://www.fool.com/news/commentary/2004/commentary04072001.htm.I would recommend also seeing this commentary: http://www.fool.com/news/commentary/2004/commentary04072802.htm?source=mppromo It pokes a lot of holes into Nathan Slaughter's commentary.--Markwho has shares of three different index funds (total stock market, total bond market, REIT) and a tax-managed fund (international), none of which are the S&P500 Index.
Mark and Bob-Thanks for the input. I had just read hole-poking column earlier today and I found IRS 590 as well. I'm beginning to realize that I'm probably not going to be able to get that cash into a deductable IRA. I will probably up my contribution a bit to TSP. Stay safe-Talbot
I, too, am a federal employee and contribute 9% to TSP plus the over 50 max. Since I am a CSRS employee, I do not get a match like the FERS employees do. That was the only positive thing I saw when the CSRS folks had a chance to switch to FERS back in the late 80s. Since the addition of the S Fund and the I Fund, my returns have gone up. I am currently invested in 50% G, 10% S and I and 30% in G until things settle down a bit. I had been in 50% G and 25% both S and I, but lowered my holdings in S & I when the market started down. I haven't lost anything in the G Fund and itt is paying 4.38% right now, so that beats inflation.Lobo