The TSP Vs. the IRA

Troy is a federal employee, and he devotes $700 to the Roth TSP each month. He also puts another $200 a month to an IRA. Should he scale back the Roth TSP in favor of the Roth IRA?

QUESTION: Troy in Baton Rouge is a federal employee, and he devotes $700 to the Roth TSP each month. He also puts another $200 a month to an IRA. Should he scale back the Roth TSP in favor of the Roth IRA?

ANSWER: You want to get to 15% of your household income with the total of what you’re doing. We call that Baby Step 4. Then we move onto funding the kids’ college and paying on the house, then come back and max out everything.

The only advantage to doing your individual Roth IRAs over your thrift ones is that you have more options for investing. You have a little more control over it and don’t have to go through as much bureaucracy to get to it if you want to change something around or move it or something.

In your Roth IRA, you can choose from about 8,000 mutual funds. With your TSP, you have about four or five options. They are not bad, but they’re not super great. I don’t do backflips because they’re so awesome.

The C, the S and the I are the ones I use when I’m recommending the thrift savings plan. I go heavy on the C, which is basically an index fund; it’s like an S&P 500 fund. I would be real heavy in that.

I probably would go through the thrift if you get a match, until you get the match. Then I’ll probably do my individual Roth IRA before I dump much more into there, but only on the basis of having more control and more selection.

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