Reply to "maxing out" TSP, 401, etc.

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]how do people afford to contribute 18k when at a fed gs12 or 13 salary?[/quote]

Just do it. There are many ways to do - adjust your other money going out.[/quote]

Correct...just do it.

I'm 29 and make $52k as a federal benefits & retirement counselor.  I max out my TSP contribution yearly (last year $17.5k, now $18k), as well as a traditional IRA with $5,500.  I also have a side-gig (~$10k/year) and contribute the maximum deductible amount from my 1099 earnings into an SEP-IRA ($2,400 last year).  My effective federal income tax rate for 2014 was 7.3%...not too shabby.  Both the traditional IRA and SEP-IRA contributions get transferred into TSP (can't beat the cost anywhere else, including Vanguard). I've done this yearly since 2010 and already have early retirement (45?) on my mind.  And since I'm already maxing everything, every raise I get in the future is all mine (instead of bumping up my contribution % trying to play catch up).  You have to make saving a goal, then a priority, and then just do it.

To put my expenses in perspective, I rent a shoebox-sized basement apartment in Arlington for $800/mo, have eaten enough oatmeal and rice in my 20s for five lifetimes, and still have my first car from high school that I drive practically everywhere in.  I rarely drink (gigantic waste, especially at the bars), but have plenty of fun every weekend.  And I still manage to sock away $1,000/mo into a Vanguard taxable account.  Having zero debt makes it all possible.  I also don't have a bunch of kids, cars, houses, boats, timeshares, etc., etc. that I can't afford.

CONTRIBUTE THE MAX. It hurts, I know personally, but it puts you on an actual track to retirement, not just hopes and dreams. If you're not maxing out your tax-advantaged retirement account space, you're only cheating yourself.  Time is your greatest investing friend and compound interest is simply magic.  Contributing the max gets you the up-front tax savings now, helps you accumulate a huge nest egg, and then gives you the choice of deciding exactly what your tax bracket and income will be in retirement.  The fact that Uncle Sam has put a limit on what you can contribute, is a sure sign that it's a good deal.  You can borrow for college, cars, and houses all throughout your lifetime, but you absolutely cannot borrow for your retirement.

At my agency, I get ecstatic when 20 & 30-somethings come into my office to talk about retirement planning and TSP.  I have the chance to hopefully steer them onto the right path to earning a very comfortable retirement.  With dedication and perseverance, you really do EARN it. When folks 55+ come in, a lot of times it's too late for me to be much help.  When I see their $100k (or less!?!) TSP balances I wonder which type of dog food they'll enjoy the most in retirement.  On the contrary, when the quiet GS-9 admin assistant in her 40s comes in for retirement planning and shares that she already has $500k+ in TSP, I can only tell her keep up the good work and don't stop whatever she's doing.

If I can make it happen on my pittance of a salary, you can too.

[i]"The best time to plant a tree was 20 years ago.  The second best time is today."[/i][/quote]

You sound like you're doing great.

But your sanctimonious attitude leaves a lot to be desired. By which I mean the dog food comment, and the dog food comment, and the assumption that all people your age and older might want to sacrifice kids and an adequate living space. [/quote]

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