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I am currently maxing out a Simple IRA (Self Employed) for both my spouse and I at $12,500 each, and I have been deployed to the middle east. I would like to start contributing to the military TSP Roth plan.
As you may guess, I don't qualify for the Roth IRA due to income phase out limit, so I have several questions:

1. Can I contribute to the military TSP Roth? Or, does my income prevent me from the Roth version of the tsp as well?

2. Can I contribute to the TSP in it's tradition form up to the limit of $18,000 minus the 12,500 that I'm putting in my Simple IRA?

3. Obviously, I would like to contribute to the Roth version of the TSP if possible, but if not, should I still invest in the traditional TSP or should I just start putting all that money and more into a regular investment account?

4. Embarrassingly enough, I've been sitting on a ton of cash (over $100K) and I now want to invest it. Would it be wise to keep costs low with a Vanguard fund(s) or put it in my Ameritrade Acct and do ETF's for the S&P and Nasdaq??

Thanks in advance for all of your help Fools!

CD
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CD,

I can't comment on questions 1 – 3, but with regard to 4, by all means keep costs low. Buying ETF's through a discount broker makes sense to me, but many feel the stock market is overvalued right now. In market corrections, cash is your friend, and there is no reason to be embarrassed by it.

Ratio ~
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In order to qualify for a TSP you need to be employed by Uncle Sam, so that would negate the self employed option. If you qualify for TSP, you can choose between the ROTH or non-ROTH option. If you have a TSP, you can still have an individual IRA or ROTH on the side. If you earn too much for the private ROTH, you can 'back door' it through yearly conversions, just don't take the tax deduction - making the conversion easier. Yearly contribution limits still apply. I am not a tax/finance professional, so take the advice as that.
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I am currently maxing out a Simple IRA (Self Employed) for both my spouse and I at $12,500 each, and I have been deployed to the middle east. I would like to start contributing to the military TSP Roth plan.
As you may guess, I don't qualify for the Roth IRA due to income phase out limit


Are you eligible to contribute to the military TSP? (I'm just confused about how someone is eligible for the military TSP, but still has substantial self-employment income.)

I would also suggest that for your self-employment income, you may want to look into investing through a 401(k) account, as you can make the employee contribution portion into a Roth option, which is not possible with the SIMPLE IRA. Additionally, the contribution limits for a 401(k) plan are higher than for a SIMPLE IRA. Many administrators, including Vanguard and Fidelity, now offer small business 401(k)s for relatively low costs. Here is an article comparing different plans available to small businesses: http://www.obliviousinvestor.com/sep-vs-simple-vs-solo-401k/... (The article has not been updated to reflect the 2015 401(k) employee contribution limit of $18,000.)

If you do choose to change from the SIMPLE IRA to a 401(k) account, and you invest in the military TSP, you need to be aware that the $18,000 contribution limit applies to the combination of contributions for both accounts.

1. Can I contribute to the military TSP Roth? Or, does my income prevent me from the Roth version of the tsp as well?

If you are eligible to contribute to the military TSP, you can contribute to either the traditional (pre-tax) or the Roth option (or both), regardless of your overall income. The amount that you can contribute to the military TSP is limited by the overall TSP contribution limit of $18,000*, plus an additional $5,000 catch-up contribution if you are 50 or older. It is also limited to the amount of pay that you receive from your military employment.

2. Can I contribute to the TSP in it's tradition form up to the limit of $18,000 minus the 12,500 that I'm putting in my Simple IRA?

The military TSP contribution is not affected by the SIMPLE IRA contribution. If you had been contributing to a 401(k) instead of to a SIMPLE IRA, the total contributions to both would be limited to $18,000*.

3. Obviously, I would like to contribute to the Roth version of the TSP if possible, but if not, should I still invest in the traditional TSP or should I just start putting all that money and more into a regular investment account?

That depends. One of the things that the TSP plan is noted for is having very low expenses for participants - typically lower than other retirement plans. However, the investment choices are also rather limited. If you are happy with the investment choices, the TSP is probably the lowest cost way to invest your money for retirement. (In fact, you may wish to consider rolling your SIMPLE IRA account over to the TSP.) Whether to make a contribution to a pre-tax (traditional) retirement account, a Roth retirement account or a taxable account depends on both your current tax situation and your expectation of what your future tax situation will be.

4. Embarrassingly enough, I've been sitting on a ton of cash (over $100K) and I now want to invest it. Would it be wise to keep costs low with a Vanguard fund(s) or put it in my Ameritrade Acct and do ETF's for the S&P and Nasdaq??

If this is cash that you want to have invested, and you are just looking into investing in the S&P and Nasdaq indexes, then I would suggest comparing the costs for the Vanguard funds, the Vanguard ETFs and the index funds and ETFs available through Ameritrade, and choosing the lowest cost option. Before investing all of the cash, I would suggest making sure that you have enough cash to meet any potential emergencies/unexpected expected, plus any expenses expected in the short term that won't be covered by your income. This will minimize the possibility of having to sell investments at a loss due to a need for cash.

AJ

*The $18,000 does not include non-Roth after-tax contributions, if they are allowed by either the TSP or the 401(k). Due to a recent ruling by the IRS, these non-Roth after-tax contributions may now be rolled over to a Roth IRA (subject to roll over rules for your plan) or to the Roth option within your plan (again, subject to rules for your plan). If you choose to set up a 401(k) account for your small business, you probably will want to set up a plan that can accept non-Roth after-tax contributions, and move them on a regular basis to a Roth option in your plan.
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I see where the vagueness made it hard to reply so I wanted to give a clearer picture:
Wife and I are in our early 40's.
We own a business and I'm an Army Reservist.
I am still taking a check ($10/hr)from the business while being deployed as I do much for her online and that's how I planned to keep contributing to the Simple IRA.
I chose Simple IRA instead of a 401k since we have over 40 employees and they come and go quickly (restaurant). Trying to minimize the paperwork and obligation to offer to employees that aren't long term types.
I am thinking of doing some agressive property investing when I get back, we currently own 5 properties, 9 units.
Our family ambition is to purchase our first "vacation" rental in NC, SC, or FL when I return.
About $300K in Trad & Roth IRAs
Over $200K avail to invest allowing room for emerg. funds both pers. and bus.
Only bus debt including rentals is a $98K bal on bus. loan at 4%.
Only consumer debt is a car pmt at $24K balance at .9% financing. (yeah, I know it should have been paid off but that was before I got notice of deployment and I thought I would use their money and buy property or invest my money.
I obviously can't purchase anything other than investments so property is on hold. I'm trying to figure out what to do with the cash present and avail by the end of the year. I won't be home till March 2016.
We should make about $300K this year and roughly 60 of that won't be taxed in the combat zone.
I'm thinking pay everything off, $98K on business and $24K on auto loan. I wanted to max out the Simple IRA, Contribute to the military TSP (still seeking advice on ability to invest in the Roth version of the TSP) and then putting the rest in a taxable investment like SPDR, EFT's, or just a Vanguard Fund(s).
Now, let me have it Fools!
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Only bus debt including rentals is a $98K bal on bus. loan at 4%.
Only consumer debt is a car pmt at $24K balance at .9% financing. (yeah, I know it should have been paid off but that was before I got notice of deployment and I thought I would use their money and buy property or invest my money...

...I'm thinking pay everything off, $98K on business and $24K on auto loan.


This is probably contrary advice, but I definitely wouldn't pay off the auto loan, and maybe not even the business loan.

0.9% is less than the inflation rate, which means the bank has been paying you to borrow money. How great is that? You gain no advantage by paying it off.

Business loan is a little more on the bubble. The disadvantage to paying if off is that you won't have the money to invest in property when you get back in a year, if you chose to do that.
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syke6,

I understand what you're saying. You know how so many people just say, "pay it all off and have the piece of mind." It's hard to ignore it when so many people say it.

So do you say just invest it all and know that I can have a line of credit when I need it or keep some cash "just in case"?
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So do you say just invest it all and know that I can have a line of credit when I need it or keep some cash "just in case"?

Not syke6, but here's my opinion. Since you are obligating yourself to loan payments if you don't pay off the loans, I would say it's best to keep some cash for an e-fund - at least 6 months of loan payments, if not 6 months of full living expenses, rather than investing it all. Also, depending on how soon you are going to want the money, and how bad it would be if you lost principal - I would be cautious in investing anything you are planning on using in less than 4 - 5 years.

AJ
- who keeps a hefty e-fund (more than 1 year) and could pay off her mortgage, but doesn't because the rate is only 3.25%
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I understand what you're saying. You know how so many people just say, "pay it all off and have the piece of mind." It's hard to ignore it when so many people say it.

So do you say just invest it all and know that I can have a line of credit when I need it or keep some cash "just in case"?


Many people are wrong. My philosophy is that your finances should be organized in such a way that if you take a financial blow, you are able to remain standing. Financial blows include things like changes in employment status or investment losses, and sometimes can occur simultaneously. These events are rare, but over long periods they happen to most everybody once.

If you have enough cash and liquid assets to get you through a financial crisis, then invest away. For planning purpose, I assume my stocks are worth 50% of current value. Because I have a lot in stocks, I don't need or keep much cash on hand.
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