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Looking at the government’s chart of TSP expense ratios going back to 1999 these have ranged from a low of .015% in 2007 to a high of .102% in 2003. L-funds are very much like Target Retirement Funds. If you are fortunate enough to have access to them, max them out.

The reason for the variation, to quote the government site, is: “The TSP expense ratio represents the amount that participants’ investment returns were reduced by TSP administrative expenses, net of forfeitures.” Even at their worst, these are very low expense ratios—often lower even than Vanguard index funds, and that’s low! There are five basic TSP funds: Own both the C and the S in about a 75/25 balance and you’ve basically got VTSAX. And in this one case, because of the ultra-low fees, I wouldn’t roll them into an IRA once you leave your job.

But hopefully I can provide a simple explanation of each along with some considerations to ponder. This is where we’ll want to put investments that are already “tax-efficient.” Tax-efficient investments are typically stocks and mutual funds that pay qualified dividends (dividends that receive favorable tax treatment) and avoid paying out taxable capital gains distributions.

The Ordinary Bucket is where we hold investments that are not part of any tax-advantaged plan. This is where everything would go were there no taxes on investment returns and no opportunities to defer them. Such distributions are typical of actively managed funds that engage in frequent trading in their portfolios.

Other than tax-exempt municipal bonds, they go into our tax-advantaged bucket. Before we look at the specifics of IRAs and 401(k)s, this important note: None of these tax-advantaged buckets eliminates your tax obligation. When the time comes to withdraw this money, taxes will be due.

Cash is also all about interest but, more importantly, it is all about ready access for immediate needs. So will penalties if you withdraw before age 59 1/2.

Most modern economies recognize the value of investing and seek to encourage it.

In general: TSPs (Thrift Savings Plans) These are retirement plans for Federal employees, including military personnel. Unlike the fee heavy cesspool too many 401(k) plans have become, a TSP offers a nice—but not overwhelming—selection of very low-cost index funds. These are “Lifecycle” funds made up of the other five held in various allocations designed for a particular time horizon.Broadly speaking, there are two types of buckets: Now at this point I must apologize to my international readers. I am completely ignorant of the tax situation and/or possible tax-advantaged buckets of other countries.My guess is that, at least for western style democracies, there are many similarities.Volumes have been written about each of these and the strategies now associated with them.Clearly, we haven’t the time or space to review them all.

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