Thread: ROTH TSP

hi dave, is anyone talking about a ROTH type option for TSP?
Congress passed legislation for ROTH 401(k)s that went into effect 1 Jan. 2006. this would be like a ROTH IRA were you pay tax now on your contribution and all the money in the account plus all the compounding would be tax-free at retirement. please help get the word out
THANKS Chris

Originally Posted by ROTH_TSP

get more people talking about us having a ROTH type option for our TSP

You can start a Roth right now on your own and can even set up payroll deduction if you are so inclined, why do you want it tied to TSP? That would limit your options. Many people on this board advocate starting a Roth, primarily for flexibility/tax reasons when you retire.

We need more ROTH TSP talk !
Congress passed legislation for any company to start ROTH 401(k)s as of 1 Jan. 2006. We need this option for TSP it would be better than a ROTH IRA because we would be able to contribute up to $15,000 into any combination to a regular and ROTH type account. Who can we talk to to get pressure to get this started ASAP? everyone i talk to like the tax-free withdrawls at retirement. Thanks Chris

Looked over some articles about this and seen some figures to support the information below.

Always get into your 401K first to get any matching from your employer.

Second choice, Max the Roth before maxing out 401K

Next Max out your 401K plus catch-up if over 50
( Currently 20K per person as Birchtree pointed out)

My wife and I are eligible for both so we are currently saving around 50k a year. Pay yourself first as much as you can. My only hope is to someday have as much money as Birchtree does!!!! Go Go Birchtree!!!

In my opinion this is the way to go!!!!

If TSP wanted they could offer us a ROTH type option- help spread the word.
Congress passed legislation that went into effect 1 January 2006, allowing any company to start ROTH type options to there 401(k) accounts. This would be great for our TSP ( taxes are at the lowest point in history-now)theres already talk of raising taxes, i would rather pay now on my contributions and hve all the compounding Tax-Free at retirement. just like a Roth IRA.

The TSP is what it is. If they had a ROTH option it would be nice, but we do still have that option 'outside.' $15000 tax-paid into a ROTH is not that attractive to me. I need the tax-savings so I would reverse the priorities and max out the TSP before maxing out the ROTH, but that is my preference, merely. Having both is the main thing, which we do in my house. I really like the idea of having a tax-free income stream.

Hey, T-ROTH, thanks for reading my account-talk thread.

Dave

Yes, but current tax rates (thanks to Bush) are pretty low, aren't they? In many ways, it makes more sense to put money into a Roth IRA or 401k because of the historically low rates. The tax savings will be even greater on standard 401k money when tax rates go back up. Of course, I still put money into the TSP because of the match (that I'll be getting soon).

Originally Posted by robo

Looked over some articles about this and seen some figures to support the information below.

Always get into your 401K first to get any matching from your employer.

Second choice, Max the Roth before maxing out 401K

Next Max out your 401K plus catch-up if over 50
( Currently 20K per person as Birchtree pointed out)

In my opinion this is the way to go!!!!

I have a couple questions about this to get some clarification. Someone at work said that Roth was better than TSP. I couldn't see it. Can ANYONE explain the benefits of Roth over maxing out TSP first??? Playing catch up later in life (over 50) seems like a waste of some free money. I am not versed in investments at all. I see the matching 401K easily enough, after that it's unclear to me. Thanks ahead of time.

Originally Posted by IllinifanMichael

I have a couple questions about this to get some clarification. Someone at work said that Roth was better than TSP. I couldn't see it.

Well, I can't see it either. If a Roth is tax paid and TSP is tax deferred, then TSP whoul have a compounding advantage.

Maybe rokid, Georgiagal, or tsptalk could better answer it. It's too cold outside to work on the lilly pad!

Originally Posted by Spaf

Well, I can't see it either. If a Roth is tax paid and TSP is tax deferred, then TSP whoul have a compounding advantage.

Maybe rokid, Georgiagal, or tsptalk could better answer it. It's too cold outside to work on the lilly pad!

Yea my youngest son and I were going to play golf, but 35 degrees and dropping here in Illinois doesn't make for relaxing time. I do hope someone can enlighten me. The compounding issue is my hurdle I'm thinking. I have 5 days off before heading back to work and I would like to go back armed, one way or another.

Do you like to pay taxes on your investments? Does it give you a thrill to see federal and state governments rob you of your hard earned money? Then I guess it feels good when you put that money away in your 401k, because your deferring the taxes on it. It reduces your taxable income and the government gets less of your money. It’s a sweet deal when you get that government 5% match. Also, as your pay increases you may you reach the “highly paid” employee status. If this happens you may need to put more in the TSP to reduce your adjusted gross income to get below the Roth IRA thresholds ($98,000-$110,000 single, 150,000-160,000 married joint).

But the day will arrive when the tax man will extract its due at whatever the income tax rate is at the time. Do you think the rates will be lower or higher in 10, 20, or 30 years? In my opinion, the income tax rates will be higher. So it’s better to pay the taxes now, and have tax-free income in the future, by putting some money in a Roth. There are others reasons why the Roth is a good thing. A Money magazine article from last summer points out other advantages of a Roth. A Roth allows you to earn a tax-advantaged return on more dollars when you fund it to the max.This is the link to the Money article.
http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/08/01/8382153/index.htm

It’s my belief that the best investment strategy is to fund your TSP/401k to get the max employer match, then the Roth IRA, then 5% or so in taxable investments. Of course you also need to fund the emergency fund, which could be second or third in the list. If you have money remaining to invest, go back and put more in the TSP/401K. You really should have a balanced retirement portfolio having investments in taxable, tax-deferred, and tax-free accounts. That way you will have the flexibility to withdraw from accounts that minimizes the tax bill, whatever the rates will be in the future.