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Thread: Retirement changes... SGLI/TSP/IRA, etc

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    #1

    Retirement changes... SGLI/TSP/IRA, etc

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    This is for anyone, but I'm sure USAA_JJ has best advice..


    Hubby is due to retire in a year.

    What do we need to do about the SGLI (can we put that into something else)?
    What about his TSP (will that end upon retirement)?

    What is the Roth TSP and how does it differ from a ROTH IRA or any other IRA?
    Can we do a Roth TSP if he is no longer active duty?

    Any other financial advice in regards to retirement, specifically things we need to change so we don't 'lose' anything after retirement?

    There are 10 types of people in the world, those that understand binary and those that don't
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    #2
    :stalking



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    #3
    SGLI ends at the end of service, assuming a typical discharge. Basically, he had life insurance for his time in service (as did you if you opted for that) and that insurance goes away when he gets out. So if you want life insurance, you are going to have to purchase it. USAA does sell insurance, though shopping around is always smart. With insurance though, you need to make sure you are very careful when comparing policies as it is easy to have small differences in policy (that end up being a big deal) that result in big price differences. For most people, term insurance is best. It is way, way cheaper, but you can keep it for as long as you need it (when you are older, kids grown, house paid off, etc, there is little to no need for much life insurance). Brokers will push whole life policies (which has many different names), but that's usually not the best choice.

    You will keep the investments you currently have in TSP (in other words, you will keep the money/funds you currently own), but you can't contribute more after retirement (unless he gets a gov't job that makes him eligible). So you will have to stop contributing, and you won't be able to do a Roth TSP after he gets out, either.

    USAA has great investment options and you can start an IRA (Roth or not) through them. If you invest in USAA mutual finds, you pay no fees to make investments and many of their funds have very, very low expense rations, which is one of the most important things to look for in a mutual fund. They also offer target investment accounts. If you are unsure about investing, that is a great way to go. You pick an estimated date that you will want to start withdrawing the money (and with a ROTH that essentially needs to be age 59 1/2 or later) and then the investment you have is managed in such a way that is maximizes the risk/return issue as appropriate, getting more conservative as you get closer to using your money. So if you will be 60 in 2040, you'd just pick their targeted retirement 2040 fund and set up a monthly investment into that fund (which they can help you do over the phone) and then it takes care of itself.
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    #4
    wow, thanks villanelle..

    I already have my own IRA, so I suppose we can just put whatever we had going to TSP into that?? But I will cross that bridge I suppose once we figure what job he gets (ideally we would use a company 401K if needed or TSP if govt).

    The insurance is something way out of my league. Term insurance, is that different than life insurance? We would want something in the odd chance one of us gets killed (such as a car accident or the like) and/or something to cover should we get disabled (this may not even be an insurance, I'm not sure).

    Is there anything else recommended we should be mindful of?
    or rather, anything that should be handled prior to him getting out?

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    I would talk to an agent re: your life insurance options. Depending upon whether you want the policy to hold cash value or not, you have different options: term or whole life I believe. You can't know which is better for you until you know what you really want, cost and options...



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    #6
    http://www.insurance.va.gov/sglisite...ting/FSGLI.htm

    That is how to convert the FSGLI

    and this is how the SGLI for the servicemember works

    Veterans' Group Life Insurance, Servicemembers' and Veterans' Group Life Insurance (U.S. Department of Veterans Affairs)

    If i'm understanding it correctly anyhow..

    Other than that I have no idea about anything. Sorry.
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    Quote Originally Posted by TrishAFSpouse View Post
    wow, thanks villanelle..

    I already have my own IRA, so I suppose we can just put whatever we had going to TSP into that?? But I will cross that bridge I suppose once we figure what job he gets (ideally we would use a company 401K if needed or TSP if govt).

    The insurance is something way out of my league. Term insurance, is that different than life insurance? We would want something in the odd chance one of us gets killed (such as a car accident or the like) and/or something to cover should we get disabled (this may not even be an insurance, I'm not sure).

    Is there anything else recommended we should be mindful of?
    or rather, anything that should be handled prior to him getting out?
    Term and whole life are different kinds of insurance. With whole life insurance, you'll pay a much higher monthly premium. However, you are guaranteed to have that policy, at that rate, for your entire life. If you are diagnosed with diabetes in the future, for example, you'd have trouble finding life insurance (and if you found it, you'd pay a *huge* amount). With whole life, you lock in the rates today when you are younger and healthier. There is often in investment/cash value component to them as well, but that gets very complicated. The key is that you get to keep your policy for your whole life. If it costs you $200 a month, and you pay that every month, then eventually, you (or your heirs, I guess) will get the payout. And they can never raise your rates from that $200/mo.

    With term life insurance, you pay a much lower premium. You buy it for a set term. Let's just say you are 40 and buying a 20 year policy. So when you are 60, the policy is over. If you haven't died, then no one got paid anything. (In that sense, it is like health or car insurance. You are paying for anything that happens while you are paying. Once you stop paying, you have no coverage, so you might pay for car insurance for 30 years and never get to use it, just as you may pay for term insurance for 20 years and never get anything paid to your beneficiary.) If it is a 20 year policy, once that time is up, the policy is over. You are now 60, and have a health problem. That could mean that you can no longer get insurance, or that if you can, it will be crazy expensive. However, at age 60, your kids are probably grown. You have way more savings. Your house is close to being paid off. So the need for insurance is much less, meaning it isn't necessarily bad that you can't afford a policy, or that you can only afford a much, much smaller policy.

    An agent would be happy to talk over the options with you, but just be careful. As I said, they almost always push whole life. The make a lot more money off whole life. That, in and of itself, tells you something.

    You also mentioned something that covers disability. This is a different policy. Conveniently, it is usually called disability insurance. There are short term disability policies (think GEICO and the duck commercials) that cover shorter term issues. Broken leg leaves you unable to do your job as a foot model? You get some money for the 8 weeks it takes for your cast to come off. Long-term disability is more important and covers you in case something huge happens and you are unable to work at all.
    As for IRAs, you say that you have one yourself. I'm not sure I understand your question about whether you can put money from TSP into that. Starting in 2013, the limits for an IRA are $5500 per year. You can only put that much in (unless you are over 50). You and your DH can each have one, however, so in reality you as a couple can put $11,000 into IRA accounts. If you aren't at $5500 per year in yours, then yes, you can put monthly investments that were going to TSP into your IRA, until you get to the $5500 limit. Once you are at $5500, you'd need to do something else with it, like put it in an IRA in DH's name. If you have more than $11,000 to invest, you can open a regular (non-IRA, non-retirement) account and make investments there. That money isn't tax-protected like an IRA or Roth IRA is, however. You invest post-tax income, and you pay taxes on the gains. So putting the money in an IRA of some kind is best. maximize that $11,000 you have in potential Roth dollars for your family first, then invest any remaining money in the taxable account.

    If his work has a 401k and there is a match of any kind, that soars to the top of the list because the match is free money. In that case, invest up to the match first. Then invest in your IRAs, then in the taxable account. If there is no match, then the IRAs are better than the 401k almost always, because your choices are far less limited and you can minimize fees.

    I'd start shopping for life insurance now. The investment stuff can wait until he finds a job and figures out if he'll have a 401k, if you want.

    HTH!
    Science always wins over bullshit. ~Dick Rutkowski
  8. "If you don't like my attitude, quit talking to me"
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    #8
    again, thanks villanelle... very informative.

    Right now I am not contributing to my IRA, it was created because I had to roll over a 401K from a previous job, so we can easily put in the $5500 per year if needed, but yes, if his new job has a matching 401k (or any 401k) that is how we will go. My company has a matching 401k, so that is where i am invested at the moment (didn't have this job or any job at time previous 401k needed rolling over).

    I am definitely going to look into the life insurance, based on what candilynn posted, if I want to convert our sgli (an option) it must be done within 120 days of effective retirement date. With him being away makes it a 'little' more difficult as we have to coordinate what needs to be done.


    I still feel like I am missing something, so far this all seems to easy..

    There are 10 types of people in the world, those that understand binary and those that don't
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    If his new job has a 401k with no match, you'd almost definitely be better off going with an IRA for him. The only thing that makes a 401k sit at the top of the list is the free money from the match.

    Also, do keep in mind that IRAs are essentially individually owned. Instead of putting $5500 in yours every year, you might want to do $2750 in a Roth for each of you. Realistically, it might not seem like there is much difference, but there can be in the event of death. Since you shouldn't be paying a fee to open or hold the account, the costs are the same, but 2 accounts, even if they are smaller, does have an advantage or two.

    And before you convert the SGLI, do make sure to get some other quotes. Basically, that is just one way of purchasing an essentially new policy. I am guessing the rates are pretty good, but you'll want to shop around and make sure it's the best you can do for the insurance you want.
    Science always wins over bullshit. ~Dick Rutkowski
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    One last thing (sorry!) but you said he is retiring, so I assume that means you'll have Tricare for Life, right? If not, health insurance is probably the biggest priority of all these things.
    Science always wins over bullshit. ~Dick Rutkowski
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