My savings account currently has 4.85% interest

[TallBill]

Once my account crosses $10k in savings, i can bump it to some premium account and earn 4.85% interest. Cd's from the same bank (USAA) are at like 4.9% interest. Should I even bother looking for something else, or what?

I was considering an IRA, but if I stick with my military goals, I'll be retired, pulling half income for life at the age of 45-46.

 

[JS80]

In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

 

[Engineer]

Originally posted by: JS80
In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

OP is listed as Tennessee. No state tax in Tennessee so no gain on T-bills.

 

[shortylickens]

Thats good for a savings account, but in the last P&N debate I had (concerning Social Security) many folks agreed you should find things that average 10%.

When I was in I used the Thrift Savings Plan. Put away 20% of my base pay and the Navy matched it dollar-for-dollar. Then I rolled it into my companies' 401K.

 

[JS80]

Originally posted by: Engineer

Originally posted by: JS80
In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

OP is listed as Tennessee. No state tax in Tennessee so no gain on T-bills.

that is correct.

 

[Engineer]

Originally posted by: JS80

Originally posted by: Engineer

Originally posted by: JS80
In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

OP is listed as Tennessee. No state tax in Tennessee so no gain on T-bills.

that is correct.

Although 6 month t-bills are running just over 5%.

Also note, many online banks are offering CD's with 5.35 or above ranges. If you want to go long term (3 years or so), I've seen some offering 6.35 or so.

 

[Taggart]

how do you figure out the effective interest rate for Tbills if you have a state tax? I live in GA.

 

[Engineer]

Originally posted by: Taggart
how do you figure out the effective interest rate for Tbills if you have a state tax? I live in GA.

The taxed equivalent rate = the following:

For non itemizers: Yield = T-bill yield * ((1 - Fed tax rate) / (1 - Fed Tax Rate - State Tax rate))

For itemizers: Yield = T-bill yield / (1 - state rate)

With 6% KY tax and 25% federal tax, my effective rate during last weeks auction for 6 month t-bills was 5.532% (non itemizer).

Edit: What's really sad is that I spit the above formulas out from memory without a second thought. Too much time @ the FW finance forums! 😛

 

[Taggart]

Originally posted by: Engineer

Originally posted by: Taggart
how do you figure out the effective interest rate for Tbills if you have a state tax? I live in GA.

The taxed equivalent rate = the following:

For non itemizers: Yield = T-bill yield * ((1 - Fed tax rate) / (1 - Fed Tax Rate - State Tax rate))

For itemizers: Yield = T-bill yield / (1 - state rate)

With 6% KY tax and 25% federal tax, my effective rate during last weeks auction for 6 month t-bills was 5.532% (non itemizer).

Edit: What's really sad is that I spit the above formulas out from memory without a second thought. Too much time @ the FW finance forums! 😛

😀

Yeah, I lurk over there, you're Engineer over there too, right? Thx for the formula.

 

[Engineer]

Originally posted by: Taggart


Yeah, I lurk over there, you're Engineer over there too, right? Thx for the formula.

You're welcome. Yep, that's me! 🙂

Great forum, IMO, for finance tips/secrets/rates. 🙂

 

[whistleclient]

i'm in CA, how do i go about buying T-Bills?

 

[Engineer]

Originally posted by: tangent1138

i'm in CA, how do i go about buying T-Bills?

Click me!


13 and 26 week auction are generally on Monday (by 12 noon) with t-bills delivered to your account by Thursday.

4 week bill auctions are generally on Tuesday with the bill delivered to your account on Thursday.


By the way, if someone in California in a 28% Federal tax bracket bought a T-bill last week, it would have been the equivalent of 5.85% YIELD for a 6 month bill. Goes even higher if you are in a higher federal tax bracket. Goes slightly lower if you itemize as you lose part of the state exemptions.

 

[Taggart]

 

[astrocase]

Originally posted by: JS80
In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

I did not know that! I get about 4.82% in my savings but that's a lot better!

 

[Engineer]

Originally posted by: astrocase

Originally posted by: JS80
In california, it's better to buy t-bills because it's state income tax exempt (9.3%!!!!!!!).

I did not know that! I get about 4.82% in my savings but that's a lot better!

The 9.3% is the state income rate.

Use the above formulas to determine the actual rate (depending on itemizer or non itemizer). Example: The yield for this week's 6 month T-bill was 5.07%.

If you are in a 28% Federal tax bracket and itemize, you would have the following equivalent taxable yield:

5.07 / (1 - .093 ) = 5.59%

If you are in the 28% tax bracket and don't itemize, the equivalent taxable yield would be:

5.07 * (1 - .28) / (1 - .28 - .093) = 5.822%

Still far better than 4.82%, especially in California.

 

[SampSon]

Yes, you should always diversify your holdings.

So you get to draw income for the rest of your life from the military. Mabey I should join up.

 

[shortylickens]

Originally posted by: SampSon
Yes, you should always diversify your holdings.
So you get to draw income for the rest of your life from the military. Mabey I should join up.

You need to do 20 years active. And its only a small percentage of your base pay. I think they add 2% for each extra year.
And I dont really know cuz I got out at 9.
(10% disability though.)

 

[TallBill]

Originally posted by: SampSon
Yes, you should always diversify your holdings.
So you get to draw income for the rest of your life from the military. Mabey I should join up.

Each year of service is worth 2.5% toward the retirement multiplier. Hence, 2.5% x 20 years = 50%, and 2.5% x 30 years = 75%. The longer an individual stays on active duty the higher the multiplier and the higher the retirement pay, up to the maximum of 75 percent. This multiplier is applied against the average basic pay for the highest 36 months of the individual's career.

So yes, assuming that you do 20 years. However, there are a handful of other federal agencies that will let you add military time towards their total retirement time of 20 years.

I'll probably go to school once I get back from my next deployment, and do ROTC to re-enter the military as an officer. I could easily make it to 0-4 (major) in the last 16 years of my required 20. If an 0-4 retired today with 20 years in service, his retirement pay would be $2966 a month. Plus all of his VA health benefits! What a bargain huh?

 

[da loser]

"When I was in I used the Thrift Savings Plan. Put away 20% of my base pay and the Navy matched it dollar-for-dollar. Then I rolled it into my companies' 401K"

does that apply to you OP? if so, and you're not participating, then you're leaving free money on the table.

 

[xSauronx]

Originally posted by: TallBill

Originally posted by: SampSon
Yes, you should always diversify your holdings.
So you get to draw income for the rest of your life from the military. Mabey I should join up.

Each year of service is worth 2.5% toward the retirement multiplier. Hence, 2.5% x 20 years = 50%, and 2.5% x 30 years = 75%. The longer an individual stays on active duty the higher the multiplier and the higher the retirement pay, up to the maximum of 75 percent. This multiplier is applied against the average basic pay for the highest 36 months of the individual's career.

So yes, assuming that you do 20 years. However, there are a handful of other federal agencies that will let you add military time towards their total retirement time of 20 years.

I'll probably go to school once I get back from my next deployment, and do ROTC to re-enter the military as an officer. I could easily make it to 0-4 (major) in the last 16 years of my required 20. If an 0-4 retired today with 20 years in service, his retirement pay would be $2966 a month. Plus all of his VA health benefits! What a bargain huh?

nice

my brother in law just made warrant officer, after a 6 year ntnl guard enlistment had him end up as a sgt. he had to re-up for 6 or 7 years to make warrant officer and get into flight school, and said since after that he'll just need a few more years before he can draw retirement from it, he may just stay in.

 

[TallBill]

Originally posted by: da loser
"When I was in I used the Thrift Savings Plan. Put away 20% of my base pay and the Navy matched it dollar-for-dollar. Then I rolled it into my companies' 401K"

does that apply to you OP? if so, and you're not participating, then you're leaving free money on the table.

Dunno if rules changed over time, or by service or what, but as far as I know the govt matches you dollar for dollar for up to 3% of your total pay. They also pay 50 cents to the dollar for up to the next 2% that you put in.

Right now I'm only set on 3% contributions, but am bumping it up to 5% once I deploy and my pay ramps up, and my bills drop to almost zero.

 

[TallBill]

Edit - Not much info on matching contributions on tps's website. As far as I can tell, there are no matching contributions right now.

Anyways, I have mine set at 3% just so I cant touch it.

 

[Dubb]

I wish I knew more about money. I pretty much just have a stock portfolio (mostly bank of NY) that I really think I need to diversify.

 

[da loser]

Originally posted by: TallBill
Edit - Not much info on matching contributions on tps's website. As far as I can tell, there are no matching contributions right now.

Anyways, I have mine set at 3% just so I cant touch it.

matching[/L
http://www.tsp.gov/uniserv/features/chapter04.html

for some reason the link doesn't work, click on tsp features under armed services, then understanding matching contributions

Who is entitled to receive matching contributions?
Under the law that extended the TSP to the uniformed services, the secretary responsible for each service may designate critical specialties for matching contributions. Members serving in those specialties who agree to serve on active duty for 6 years may be eligible for matching contributions during the 6-year active duty obligation.

The matching contributions apply only to amounts contributed from basic pay and not from any incentive pay or special pay. If you do not contribute basic pay to the TSP, you will not be eligible to receive matching contributions. Matching contributions apply to the first 5 percent of pay that you contribute each pay period. Your contributions are matched dollar-for-dollar on the first 3 percent of pay you contribute each pay period and 50 cents on the dollar for the next 2 percent of pay.

As of the date of this Web edition, matching contributions had not been authorized by any of the uniformed services. Your service will notify you if you are eligible to receive matching contributions.

whatever that means....

 

[shortylickens]

Originally posted by: TallBill
Edit - Not much info on matching contributions on tps's website. As far as I can tell, there are no matching contributions right now.
Anyways, I have mine set at 3% just so I cant touch it.

Right before I got out: They did 100%, dollar-for-dollar. And yes, if you got out during the old system, you are capped.

(I got out less than a year ago.)