IRA's, TSP, and REI

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IRA's, TSP, and REI

Mark Manship
Realtor · Pensacola, FL · Member since 2014 · 54 posts · 20 votes

I'm a fairly new listener to the BP podcast; just got to #17, and am looking for any guidance/experience that any fellow "newbies" or vets have in allocating their capital, specifically with regards to their retirement investments (Roth IRA, Thrift Savings Plan, and Real Estate).

On Podcast #17, Jeff Brown mentions that the "traditional" vehicles towards retirement wealth are dated and end up disappointing their users at the age of 60+. I was a little late to the investment game, but started contributing fully to my Roth IRA in my mid-20's, and just recently started contributions to my TSP (military thrift savings plan) in an effort to diversify through established and well-known methods.

My concern after listening to Mr. Brown is following the path of least resistance when it comes to retirement planning; sure, maybe IRA's don't yield amazing returns, but are they still a sound means by which to save for retirement? It does seem like I would be the odd-man out if I didn't follow the crowd in investing in an IRA. After 3 years of IRA contributions, I have yet to see a ROI worth rejoicing about, and more importantly, nothing I'm seeing beats inflation. I wasn't expecting double digit returns by any means, however, I'm curious if anyone else has opted out of the IRA/TSP game in order to retain those contribution funds for REI?

My goals are somewhat ill-defined, in that I haven't narrowed in on what I would "need" to retire without a job, but in the essence of providing a benchmark for discussion purposes, let's say I would like to:

- Generate system of cash flow w/in next 10 years to supplement overseas travel expenses and hobbies for family of 5.

- Have enough wealth accumulated by age 45 to afford college tuition assistance for 1+ children

- Stop ALL W-2 work at the age of 60

- By age 60, have enough income through military retirement, cash flow, and other ROI to cover living expenses + leisure (travel, hobbies) for my wife and I; goal would be to have no mortgage on primary dwelling

- Establish a trust worth a darn to my wife, children, grandchildren, etc. (abilities to fund their own respective RE down payments, business ideas, education, etc.)

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  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    10y

    @Mark Manship

    Investing a Roth IRA in real estate is a good way to grow it. The Roth IRA would own the underlying property and all income would flow back to the Roth IRA and continue to grow tax free.

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  • William Allen
    Investor / Wholesaler · Nashville, TN · Member since 2014 · 1k+ posts · 667 votes
    10y

    @Mark Manship

    I am a military guy as well and I save as much of my income as I can. I started in stocks and bonds and have tilted much more toward real estate the past 3 years or so. I self direct my Roth IRA into real estate and returned close to 20% this year in there. I have maxed out my TSP for the last 5 years but only this year did I stop investing there so I can focus on maxing out my Solo 401k (now that my business is running well and making money) instead. I like using the retirement plans to defer taxes for now and I love real estate as the product to do it with because I can pick my investments.

    I used a TSP loan to buy another house recently so that account has also been helpful in advancing my real estate investments. I like your well thought out goals and they are similar to mine, however I want to retire in my 40's and travel / stay at home with my family more so I know that my retirement accounts won't be enough to do that. I have to advance my passive income to get me there so the stock market certainly wasn't my way to financial freedom.

    Feel free to reach out to me if you want to talk more about it.  Good luck!

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  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    10y

    For the college portion, we transferred the GI Bill to our children.  

    We have the same objective concerning travel for a family of five, and are nearly there...after a lot of shaking, we are nearing lift-off.  :D

    I cashed out my IRA to use as a down payment for a property, and am pleased that I did; my husband left his money in his IRA and is also pleased that he did.

    We have borrowed against our TSP to buy the current house, and used one of our VA loans for property number 30 and aim to use the other for a future owner occupied property.

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  • Dan Denton
    Investor · Olympia, WA · Member since 2015 · 24 posts · 14 votes
    9y

    Do some home work on the "self directed IRA" like @William Allen mentioned (and it sounds like it was what @Mark Nolan was suggesting). The range of possible investments is far greater than the "traditional" investments (in fact there are only a few things you can't invest in). 

    You are not able to benefit directly from the investment. So for example if you were to buy a beach house to rent out, you would not be able to utilize that beach house. The rent earned from rentals has to go back into the IRA, but it grows tax free (with a Roth). You have to go through a "custodian" who will manage the investment for you.

    I'm learning about them myself, but they seem to work well for syndications, contributing money to a partner's project, lending money out, etc...

    You will have a greater responsibility in the success/failure of the investment than a normal IRA, but that is why the opportunity is better.

    The Real Estate Guys Radio show just did a podcast on it on October 16th, 2016. If you're into podcasts, and it sounds like you are, it is worth a listen. 

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