There seems to be some confusion regarding the best long term investment vehicles for military personnel—so here is the rundown—best to worst
1. Roth IRA: An investment vehicle that accepts annual contributions up to $4,000 a year (goes to $5,000 in 2008). Taxed on the way in; NOT on the way out—meaning you don’t get any tax exemptions for contributing. Your investment grows tax free; you must begin withdrawals at age 59 1/2.
2. Thrift Savings Plan (TSP): Operates like a traditional IRA, but allows contributions up to $10,000 a year, instead of just $4,000 for a traditional IRA ($5,000 in 2008). There are a certain number of funds you must pick from that operate like a mutual fund—I don’t like this method because of the traditionally higher expense ratios— I prefer index funds.
Please note: The TSP is the best thing going for civilians working in the military because they are matched, much like a 401k. However, military is unmatched, so the Roth IRA is a better way to grow your investment.
Final analysis: Fully fund your Roth IRA first; any leftover dollars move into the TSP. For now, don’t worry about a traditional IRA.
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If you want to know more about the different IRAs, The Motley Fool does a decent job in this article explaining some of the differences between them.