Basic one pager from TSP. Not very helpful.
https://www.tsp.gov/PDF/formspubs/oc06-5.pdf
Has anyone received any education materials? One of the first arguments for delaying implementation was that TSP needed time to educate us on the options. Has anyone seen anything? I know that now the argument is that they need time to set up their systems to handle the changes. Whatever - I'm just wondering if I missed a mailing or something.
THanks,
d3
Basic one pager from TSP. Not very helpful.
https://www.tsp.gov/PDF/formspubs/oc06-5.pdf
I found a link to a TSP bulletin that has lots of info, and answered some of my questions. Apparently this was not made widely available to TSP'ers, but went to the Agency TSP Reps. It's a year old but I think the law was put in place in 2009, so these guidelines should still be applicable.
https://www.tsp.gov/PDF/bulletins/10-13.pdf
Some things that I found interesting:
1. NO transfers from Regular TSP to Roth TSP will be allowed. Only regular contributions to Roth TSP will be taken.
2. When you retire, you can transfer all or part of your Regular TSP to Traditional OR Roth IRAs.
3. The 5 year waiting period for taking out your Roth TSP contributions with no tax implecations starts with your FIRST Roth TSP contribution.
Get ready for April 2012!
Yeah...'Spring' is the official time. I can't locate the article now, but when I was searching the web, I ran across one 'insider's' prediction of April, saying that the board would not concentrate on implementing the Roth option until January, and he thought that meant it would take til April to get out. So I will stick with that prediction......
The Board hasn't met a deadline yet, except the 2 IFT limit. I would be surprised if the ROTH doesn't take affect much before September. Remember that you will not be able to transfer your TSP into the ROTH. You will have to start all over again. I haven't heard if you can use matching funds for the ROTH.
May the force be with us.
So the Roth TSP seems like a piece of junk.
So if I put the max into the roth, do I still get full matching funds, they just go into the traditional?
Yes, this is the same way that Roth 401ks work. Matching funds must go into a traditional account. You can choose to put some or all of your contributions into the Roth version.
I wouldn't call it a "piece of junk". It's very good for people who are in a low income bracket now (especially military folks like me). It's also good for "tax-diversification". You never know what the tax system will look like during retirement. In all likelihood, your pension and traditional TSP/401k withdrawls will be taxed. It's a good idea to have some tax free money, too. Roth IRA is first priority, but if you want to put away more than $5k a year, Roth TSP is a good option.
I sure hope that the "educational materials" do a good job explaing this. While "consult your tax advisor about your situation" is not bad advice, it's not very helpful, and many people will be at a loss on how/if to take advantage of this option.
I LIKE that! 'Tax diversification'! That's a big reason I am looking at Roth (now, outside of TSP....but once it is in place, inside of TSP.) The other thing I like is not HAVING TO withdraw at 70.5 yrs. It will be nice to have at least some in Roth so there are more options.
I fully understand why a Roth is a good option, I just wish the matching would go into it, especially since we can't transfer what we have now.
But yes, I will fund a Roth IRA first (hopefully this year, full $5k.) then consider the Roth TSP.
What many people dont understand is why the matching can not go into the Roth. Right now, many put in your TSP reduces your taxable income, and is taxed when you withdraw it. The money going into the roth tsp will not be reduce your taxable income. Its already included in your taxable income so when you with draw it earnings are tax free. This is the same with a ROTH IRA. You take $5000 from your checking account that you got taxed on already from your pay check and deposit in in ROTH IRA and the earnings are tax free.
Money that the goverment matches need to go in the regular TSP because they never tax you on this until you withdraw it. If they would let us put in the ROTH TSP then they would first have to increase or taxable income by the amount contributed. (which isnt happening). Either way ROTH or NON-ROTH the money has to be taxed.
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