personal finance
Throwback Thursday Classic Post – Step 2 to Crush the TSP – Decide
The Thrift Savings Plan (TSP) is the military’s retirement account. Learning how to maximize its utility should be high on your financial priority list. I’m going to create a guide that will show you how to crush it with the TSP. We already showed you step 1 in that guide. Here’s step 2…
The 2nd Step to Crush the TSP – Decide
If you want to crush it with the TSP, you’ve got some decisions you have to make. You have to decide:
- How much you’re going to invest.
- What investments you’re going to use.
Decide How Much You Are Going to Invest
If you want to crush it, you need to invest as much as you can afford. How much can you contribute? Here is the TSP page that lists the contribution limits.
That page may be confusing, so here is the bottom line:
- You can contribute $19,500 in 2020.
- If you are 50 or older, you can contribute an additional $6,500.
- If you are deployed to a combat zone, you can contribute even more.
- Any matching contributions you get from the DoD due to the Blended Retirement System or BRS (if you’re in it) does not count toward these limits.
How much should you contribute? As much as you can. Period. Even a few hundred dollars is better than nothing.
Decide Which Investments You Are Going to Use
The TSP is pretty simple in this regard. You only really have six options.
The first option is to just let someone else handle this for you by using a Lifecycle fund. According to the TSP:
The L Funds, or “Lifecycle” funds, use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons. The objective is to strike an optimal balance between the expected risk and return associated with each fund.
Using L Funds is a simple, easy, and effective strategy that is completely fine for most people. If that is how you want to do it, you can just put all your TSP money in the L Fund with the year that is closest to when you want to retire and skip the rest of this blog post. For example, if you want to retire in 2034, you’d invest in the L 2035.
If you are more of a do-it-yourselfer, then you have five other investment options besides using a Lifecycle fund. The five investment options can be compared in this table from the TSP website.
That is really it. You can either use a Lifecycle fund, or one of the five other funds listed in the table.
The Bottom Line – Decisions You Have to Make
Like we said at the beginning, you have to decide:
- How much you’re going to invest. (Hint: as much as you can afford.)
- What investments you’re going to use – Lifecycle vs do-it-yourself with the five other available funds.
If you decided against the Lifecycle funds, the next thing you have to do is determine your asset allocation, which is our next step to crushing it with the TSP.
Finance Friday Articles
Vanguard updated their economic and market outlook due to COVID-19:
Vanguard Economic Outlook Mid-Year Update
Here are my favorites articles this week:
How to Find Yield Without Getting Burned
Mortgage Rates Are Insanely Low
The Greatest Danger Investors Face
Here are the rest of the articles:
6 Tips for Starting a Physician Side Gig
Best Retirement Accounts For Independent Contractors
Does a Higher Advertised Return Make a Better Investment?
Financial Planners Have No Need for Prophecy
The FIRE Movement is Here to Stay
The List of Physician Side Hustles
Financial Friday Articles
Here are my favorites:
The 4% budget: Why spending flexibility is more important than withdrawal rate in retirement
Here are the rest of the articles:
5 ways in which being a doctor impacts how you should approach personal finance
Before You Decide to Leave Medicine, Ask Yourself These 5 Questions
Cap on TSP G Fund Yield Discussed by Federal Reserve
Cost vs. Reward of Becoming a Doctor or a Dentist
Create Massive Leverage Through Passive Real Estate Investing
Delaware Bank Accounts, 529s and HSAs for Asset Protection
Experience Owning a Summer Rental
Fidelity drops robo-advice fees for small accounts
Here’s an easy, low-cost way to build a retirement plan like the pros
If We Can Print Our Own Money Why Do We Have to Pay Taxes?
Income Tax and TSP Withdrawals
It’s Easier to Start a Bull Market Than Prevent a Bear Market
Money actually can buy happiness, study finds
My 4 Current and 4 Future Passive Income Streams
Net worth calculator: How to find your net worth on paper
Should You Manage Your Own Rental Properties?
Step-Up in Basis – What You Need to Know
The Doctor Loan: My Experiences Buying and Building with Physician Mortgage Loans
Finance Friday Articles
Here are my favorites this week:
Target-Date Funds Are Performing Well. But Choosing One Can Be Harder Than You Think.
What’s the Best Diversifier for Stocks? counterbalanced by Do Treasuries Have a Place in a Modern Portfolio?
Why Your Money-Market Fund Isn’t as Safe as You Think
Here are the rest of the articles:
5 Tax Benefits of Investing in a Syndication
5 Thoughts on a World with No Yield
5 Ways to Retire With $5 Million by Age 55
7 Ways For Physicians to Make an Extra $1,000 a Month
Active vs Passive Real Estate Investing
Best Passive Income Ideas for 2020
Covid-19 and Physician Burnout: How I Turned My Plank Into A Runway
Everyone Who Thinks the Stock Market Is a Game Loses
Explaining the 2020 Stock Market
How Low is Your Passive Income Tax Rate? The Taxes on Passive Income Streams
How to Fix Your Financial Problems
Investment Return vs Savings Rate: Designing Your Portfolio Pt 2
Jack Bogle Was Wrong About ETFs
My Thoughts on the “Passive Investing Bubble”
Tax-Efficient Investing and Asset Location
The Importance of Investing Money in Residency
TL;DR: The Best Finance Books in One Sentence
Throwback Thursday Classic Post – Step 1 to Crush the TSP – Prepare
The Thrift Savings Plan (TSP) is the military’s retirement account. Learning how to maximize its utility should be high on your financial priority list. I’m going to create a guide that will show you how to crush the TSP. Here’s Step 1 in that guide…
Step 1 to Crush the TSP – Prepare
Before you can crush the TSP, you have to do a little preparation. You don’t need to be Warren Buffet, but you need to understand the basics of investing and the TSP. Luckily, there are many ways to learn the basics. Here are a few:
- Read a book – Go to your library, search for a used book with AddAll (one of my favorite tools), or buy one new on Amazon. The easiest and quickest read to increase your basic investing knowledge is The Elements of Investing: Easy Lessons for Every Investor. Read this book. THAT’S AN ORDER! (unless you outrank me)
- Read an online introduction to investing – The one that I’d recommend is the Bogleheads Wiki. Here’s a link to their getting started page and their investing start-up kit. What’s the best part? All of this is free.
- Watch videos – The Bogleheads have a video series, which is also free.
- Read blog posts – My favorite TSP-specific blog posts are found at The White Coat Investor. You can read What You Need To Know About The TSP, The G Fund – A Free Lunch, or The Military’s New Blended Retirement System. I wrote the last one.
- Read the TSP website – The TSP website has a wealth of information.
Now you’ve got some homework. Once you’ve done as much of this as you can, move on to the 2nd step.
New TSP Lifecycle Fund Asset Allocations
Here’s the PDF that shows you the new asset allocations for the 5 year TSP Lifecycle Funds:
Here’s the graphic that summarizes it:
Finance Friday Articles
Here are my favorites this week:
Free Beer Plus Profits! A Craft Brewery Investment Goes Full Circle
How Often Do Long-Term Bonds Beat Stocks?
Roth 401(k) vs. 401(k): Which is the Better Option?
The Best Side Gig Is Spending Less
Here are the rest of the articles:
3 keys to building an emergency fund
5 Ways Financial Freedom Beats Burnout
10 Reasons to Consider a Nonclinical Job to Defeat Burnout
Achieving Financial Freedom as a Physician is Simple, but Not Easy
Breaking the Traditional Financial Rules
Consumer Addiction and 5 Ways to Beat It
Consumption Smoothing is Stupid
How a Career Transition Can Help You Reach Financial Independence
Indexed Annuities – No Down Less Up
Investing legend Burton Malkiel on day-trading millennials, the end of the 60/40 portfolio and more
IRS Adds New Criteria for COVID-Related Loans, Withdrawals From Retirement Plans
IRS expands criteria to withdraw money from retirement plans for those affected by coronavirus
Report of Retirees Fleeing Market Due to Coronavirus Was Greatly Exaggerated
Should spouses get to contribute to troops’ retirement savings accounts? Debate set to begin.
States Without Income Tax: Is There a Benefit to Moving?
The Best and Worst Quarters in Stock Market History
The Economy is Not the Stock Market
The Key to Successful Investing? Your Mindset
When It Comes to Social Security Retirement Benefits, Timing Matters
Finance Friday Articles
Here are my favorites this week:
Beyond the pandemic: What to expect from stocks, bonds
Don’t Leave a Mess When You Die
Top 8 questions on investing in the current climate
Top 10 Things Bogleheads Get Wrong
Here are the rest of this week’s articles:
6 Greatest Sins of Insurance Agents
6 Ways to Invest in Apartment Buildings
10 Milestones to Financial Independence Worth Celebrating
10 Reasons Why Residents Shouldn’t Buy A House
Changing My Mind About Personal Finance Due to the Pandemic
How to Fund a Million Dollar Roth IRA for Your Child with Government Money
How to Start Investing in Private Real Estate Deals
How Would Investors React If We Finally Get Some Inflation?
Mortgage Debt Versus Student Loan Debt: Which is Better to Have?
Residency Interviews: Spend Less and Interview More
Financial Blogs I Recommend
For those looking to get financial education online, here are the blogs and other online resources I’d recommend:
A Wealth of Common Sense – This is a blog written by one of the Animal Spirits podcasters I recommended you listen to. He provides excellent contemporary analysis of the financial markets.
Humble Dollar – Jonathan Clements was a personal finance writer at The Wall Street Journal for 20 years and is a well-respected source for financial advice. He has a number of books and a blog called Humble Dollar that includes a free comprehensive money guide that is a continuously updated guide to all aspects of personal finance.
Mr. Money Mustache – There is an entire early retirement culture on line, of which many physicians are unaware. If you have an interest in early retirement, you’ll love this website and the story of Pete (Mr. Money Mustache), a software engineer who retired in his thirties. It is filled with investing information, as well as practical advice on how to save money in everyday life. The site has an anti-consumerism, pro-Earth bent and Mr. Money Mustache is a strong proponent of using a bicycle instead of driving a car, even in the dead of winter. He will show you that retiring early and controlling your spending doesn’t have to lead to unhappiness. In fact, he’ll probably convince you that the less you own the happier you’ll be.
Oblivious Investor – This is a tax-focused investing blog by an accountant who also writes a series of very short, informative books on all finance topics.
Vanguard Blog – Regular readers know I’m a huge fan of Vanguard and do all of my non-military retirement investing there. You should too! Many know that Vanguard was founded by John Bogle, and those who follow his investing principles are self-named “Bogleheads.” They have a Bogleheads Wiki that you can read in addition to the Vanguard blog.
White Coat Investor Empire – Fellow Emergency Physician James Dahle, MD has created a digital and print media empire. You can’t go wrong if you make this your solitary source of financial information. There is a blog, internet forum, Facebook group, sub-Reddit, podcast, and book, so no matter how you prefer to ingest information you can find what you are looking for on this site. In addition, he has partnered with three other physician financial blogs, Physician on FIRE (which stands for Financial Independence, Retire Early), Passive Income M.D., and The Physician Philosopher. All three of these are excellent sources as well.
Debt, College, and Discretionary Spending
Here are the slides I used to record this episode of the podcast:
Debt, College, and Discretionary Spending
Here’s the screencast:
Joel Schofer's Career Planning Blog 