Step3 Prophet

Maximizing Savings Through Your Work

One of the best ways to save for retirement is through your work. If your company offers a 401K or similar program, it's hard to beat the tax advantages that saving that way can offer. I've been contributing regularly to the governments TSP(Thrift Savings Plan) program for years now, but never in any great way. They don't offer matching contributions for military members, so I've been more interested in investing in a Roth IRA and limiting my TSP contributions.

This year however, I've already made my full annual IRA contribution. That means more money each paycheck for me! Alternatively, I could take the extra money that I would have invested in my IRA and switch it to TSP. Of course, there is the holy grail of retirement saving: Maxing out my TSP contributions. For 2009 that limit would be $16,500 (the same as a 401K). That is quite a chunk of change. It comes out to $1,375 per month. Can I possibly afford to save this much? Currently I'm saving about $500, and combined with the money I'm not contributing to an IRA that would be about $900. That means I'd have to devote an additional $475 each month to long term saving.

It's tempting, and I'm pretty sure I could pull it off, but right now my entire life situation is in a state of flux since I'm moving to another country. There are a few unknowns that could come back to bite me, so I'll be a little careful here. I'm definitely increasing my contributions, but not quite to the max. Once I'm settled in my new local, I'll reevaluate my situation.

Visiting the Parents

I'm taking a week to go and visit my friends and family in my home town of Texas. From the icy slopes of Stevens Pass to the icy slopes of my parent's front door, it has been quite a week. I finally finished selling my unwanted stuff(for a profit of several hundred dollars, thank you craigslist) and I am giving my house keys back to my landlord.

As I was flying to see my parents I was somewhat shocked by all the new fees. It's been about a year since my last flight. I knew that many airlines were charging extra for checked bags, but a fee even for the first bag is pretty crazy. Thankfully, US Airways waived the fee since I am in the military and had my military ID. On the plane itself they are even charging for sodas now! It was $2 for a 12oz can! The only redeeming feature about my flight was that for the second half I had a row to myself.

Visiting the parents is a whole other matter entirely. I had to yell at my mom twice during the drive home from the airport to avoid crashing into things. Then when we got home she almost killed herself slipping on some ice on her back porch. That one had me really worried because she is not a petite woman, but thankfully it only resulted in some minor scrapes. I love that crazy woman, but it's much easier doing it from afar. 

On the investment side of things, it looks like emerging markets have quite their freefall, so I'm gingerly adding more money to my Vanguard fund. 

IRA Bonanza

I sold my Acura last week and the check finally cleared my bank account, so now I've been figuring out what to do with the proceeds.

The first thing I did was pay off the remaining balance on my first 0% APR credit card. This is the portion I wasn't able to transfer over when I switched to a new 0% APR card. I also setup automatic payments on the new card so that I wouldn't forget to make a payment and incur horrible penalty payments and interest.

My other major decision was to max out my IRA in one big lump sum this year. In previous years I've thought this was a bad idea for a number of reasons. First, I didn't have the cash to do it. Second, I wanted to take advantage of dollar cost averaging for my contributions.  [In retrospect, with a continually rising  market like we had for the past 6 years, buying it all early would have been better]. Dollar cost averaging is certainly easier on the check book.

So this year I find myself with the cash and a yearning to invest while the market is down. Granted, the bottom could still be lower yet, but I'm not good enough to call it and investing now has some advantages. I've been wanting to increase my REIT holdings for a while, but since that fund is held in my IRA I've been limited by the annual contribution limits for 2008. So this January has seen a nice confluence of factors and I bought into the Vanguard REIT fund VGSIX.

I like this fund because it, like all Vanguard funds, has low cost and low turnover. REIT funds also have impressive dividend returns. In fact, the most recent dividend payout for my REIT fund was greater than from my S&P 500 fund even though the S&P fund has significantly greater assets. Because of the higher dividend payouts, it's a good idea to keep REITs in a tax sheltered account like an IRA. Buying at the begining of the year means greater dividend payments throughout the year.

On a side note, I just found out that bonanza means an exceptionally large and rich mineral deposit (as of an ore, precious metal, or petroleum). Hopefully this IRA turns out to be a dividend bonanza!

Step3 Rises Again!

I finally have some time to get back to blogging. I hope the 17 feedburner readers are not too shocked that I've finally posted again(I'm sure Mel will be if she can get past the 400 other feed posts she hasn't read :) ). I was really busy at work the past few months, but thankfully I'm transferring to another job now and should have more time for other pursuits, like blogging.

Some financial updates: I got another 0% apr credit card to transfer my current zero balance to. For some reason, they wouldn't give me a credit limit that could take the full balance, so I was only able to transfer just over 10,000. I'll pay off the remaining balance on my original 0% card now so I don't have to worry about it coming due in a few months.

I'm selling a lot of my junk, and my cars. Because my new job is in another country, I'm paring down my possessions to travel more easily. Since I won't be needing my cars for a few years, I figured it would best to sell them and invest the money. My net worth will take a hit because I can't get what I valued the cars at when I'm selling relatively quickly, but I'll just have to roll with the punches.

I've also been saving like crazy, as the side bar will show you.

More to follow.