David Pere does the work so you don’t have to. In this episode of From Military to Millionaire, he breaks down the best TSP strategies to employ to get you on the path to financial readiness. In fact, these advanced Thrift Savings Plan (TSP) strategies will make you richer, faster.
The first strategy to utilize is the triple tax deferment. When you enter a tax-exempt duty station like a combat zone, you can contribute much more to your TSP than is typically allowed. The government does not tax your income while you’re deployed, so you should deposit that tax-free pay directly into your TSP. With this method, you avoid taxes while earning, contributing, and upon withdrawal.
The next strategy is allocation automation. If you aren’t a savvy investor, choose Lifecycle Funds for your contributions. This puts them in smart automation mode, so you avoid missteps that could cause you to miss out on tens of thousands of dollars in interest. Lifecycle funds automatically adjust from more risky investments when you’re younger to less risky investments when you’re older.
You should also time the market with the TSP. Almost no one can outpace the market long-term. Even if you were able to do this by constantly paying attention to market fluctuations and moving your money around, what you’d earn wouldn’t make up for the amount of time you put in. Simply decide on a market fund allocation and stick to it, maybe adjusting it once every couple of years if it makes sense.
You can loan yourself money from your TSP, up to $50,000, without a penalty tax. Use the general-purpose loan for any purpose. Use residential TSP loans to buy or build your primary residence. Both have a 15-year repayment plan. These loans have low-interest rates, usually between 1 and 3%.
David Pere is a former active-duty Marine who is on a mission to educate the military community about financial readiness. Most people hear that term and roll their eyes, but Pere wants everyone to know that readiness can be achieved – without a lot of effort. He teaches personal finance and real estate investing to service members to help increase savings and increase their chances of achieving financial freedom.
Want to learn more about Pere? Check out the Military to Millionaire website, and connect with him on Instagram or Facebook. Subscribe to his YouTube channel here! Take a look at David’s book – The No B.S. Guide to Military Life here.
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