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Author: bikecop554 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121095  
Subject: IRA contribution help Date: 7/31/2004 4:18 AM
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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
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Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72691 of 121095
Subject: Re: IRA contribution help Date: 7/31/2004 5:57 PM
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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

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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72692 of 121095
Subject: Re: IRA contribution help Date: 7/31/2004 6:09 PM
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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.

--Mark
who 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.


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Author: bikecop554 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72694 of 121095
Subject: Re: IRA contribution help Date: 8/1/2004 6:46 AM
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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

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Author: Lobogal Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72728 of 121095
Subject: Re: IRA contribution help Date: 8/3/2004 6:28 PM
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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

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