Jamesxxxxx: Thx for posting the FAA Roth info (My top-rated agency too). Sounds like we can use EmpExpress later this month to start RothTSP contribs. I hadn't checked with HR or links yet... they got it going faster than we might have guessed.
This was posted this morning on our parent agency's web page:
Roth TSP Allows Flexibility In Taxes Now And Later
By Sharon Dobson
Posted: May 8, 2012
On May 7, the Thrift Savings Plan (TSP) gave Federal employees the option to treat some or all of their TSP contributions as Roth contributions. Participants now have flexibility in the tax treatment of their contributions today and in the future.
In a traditional TSP, employee contributions are considered pre-tax income, which lowers the amount of your current taxable income and gives you a tax break today. TSP contributions and earnings are tax-deferred while growing in your account, but when you withdraw your money, you pay taxes on both the contributions and their earnings.
In contrast, Roth contributions are taken out of your paycheck after your income is taxed. However, when you withdraw funds from your Roth balance, you will receive your Roth contributions tax-free since you have already paid taxes on the contributions. You also won’t pay taxes on any earnings, as long as you’re at least age 59½ (or disabled) and your withdrawal is made at least 5 years after the beginning of the year in which you made your first Roth contribution. Upon your death, no part of the Roth IRA will be subject to income tax to your beneficiaries, though the Roth IRA will be subject to estate taxes.
Employee Express will begin accepting Roth contribution elections on May 20 effective on June 3. A TSP representative will answer questions at the 2012 DOT Health and Fitness Expo on May 16th from 11 a.m. to 2 p.m. in the DOT HQ West Atrium.
When making TSP elections, keep in mind that the combined total of your Roth and tax-deferred traditional contributions in 2012 cannot exceed the elective deferral limit of $17,000, or if you are age 50 or older the catch-up contribution limit of $5,500. In addition any agency contributions you receive will always be treated as a part of your traditional (non-Roth) balance. Employees may want to consult a qualified tax or financial advisor to help decide if Roth is the right choice for them.
A few facts about the Roth TSP:
- There are only two ways to put Roth money into your account: (1) From you future pay; and/or (2) Transfer Roth money into your account directly from eligible plans (Roth 401(k)s, Roth 403(b)s, or Roth 457(b)s only).
- You cannot transfer money into the TSP from Roth IRAs.
- You cannot convert money that is already in your TSP account into Roth money.
- You cannot convert any agency traditional contributions into Roth contributions.
- Agency automatic and matching contributions will always be traditional, tax-deferred contributions, even if your own contributions are only Roth.
All employee contributions, whether traditional or Roth, are added together to determine if the elective deferral maximum amount has been reached. The maximum contribution is the sum of the elective deferral and catch-up contribution limits.
A TSP participant may contribute:
- Up to $17,000.00 in combined traditional and Roth contributions.
- If age 50 or older, up to $5,500.00 in combined traditional and Roth catch-up contributions.
- For a combined total of up to $22,500.00. TSP-eligible participants age 50 or over may elect Roth catch-up contributions.
Please refer to the information displayed in the chart below.
*2012 limit
Roth IRA Roth TSP Income Limits Not available to taxpayers with income above certain limits:
Married Filing Jointly - $173,000 to $183,000
Married Filing Single - $0 to $10,000
All others – 110,000 to 125,000 Available to all participants regardless of income Contribution limits $5,000
($6,000 if at least 50 years of age)* $17,000
(plus an additional $5,500 if at least 50 years of age)* Required Minimum Distributions (RMD) Not subject to RMDs until the IRA owner dies RMDs apply to both Roth and traditional balance
(April 1st after you turn 70 ½) Rollover rules May NOT be rolled into a Roth 401(k); a Roth can only be rolled into another Roth IRA Can be rolled into another
Roth 401(k) or a Roth IRA
The Leave and Earnings Statement will list the basic information as to the distribution elected (Roth amount contributed or percent elected). The deductions will display both Roth and Roth Catch-Up as separate line items.
If you have additional questions regarding the Roth TSP plan, please contact TSP directly at 1-877-968-3778 and hit prompt “3” to speak with a representative.
Visit the TSP website to view a short video about the Roth TSP, or check out the April 2012 Thrift Savings Plan Highlights bulletin for more information.
TSP is one of three components of the Federal Employees Retirement System (FERS). The others the FERS annuity and Social Security. Together, the three components are designed to closely resemble the dynamics of private sector 401(k) plans. TSP Roth is also open to Federal employees covered under the older Civil Service Retirement System (CSRS).
Jamesxxxxx: Thx for posting the FAA Roth info (My top-rated agency too). Sounds like we can use EmpExpress later this month to start RothTSP contribs. I hadn't checked with HR or links yet... they got it going faster than we might have guessed.
I'll believe it when I see it.
Am I reading that chart right that says we I can only put in $5,000 to the Roth TSP? I thought it was going to be the same $17,000 contribution limit regardless of whether you used Roth or not.
You are reading it wrong.
The chart says you are limited to $5,000 for a ROTH IRA.
The chart says you are limied to $17,000 for the ROTH TSP, unless you are over age 50, in which case you would get an additional $5,500 added to your limit.
As to me- it doesn't matter, I can't afford $17,000 anyway. My ROTH contributoin will be lower. :-(
Wow, I just scrolled down & re-read the chart & have no idea what was wrong with me on that day. LOL
Seven,
I read in your thread that you are contributing to both traditional and Roth TSP. How were you able to sign up? I looked all through tsp.gov and didn't see a way. I'm guessing for me I'll have to go through EBIS. I can't access it from home, so will have to wait to get back to work on Monday to find out.
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You don't do it through TSP.gov, but whatever payroll system your dept. uses. We use Employee Express so that is where I set my contribution amounts to each of the Roth & Traditional TSP. You only go to TSP.gov if you want to change what funds your contributions go to. It doesn't seem to be possible to have separate funding instructions for Traditional & Roth. Whatever you set on TSP.gov seems to get applied to both.
Does anyone have any advice on how to determine if the ROTH TSP is right for me? It is available at my agency now. I've searched on line and all I can find is about being in a higher tax bracket later in life. I have no idea if that will be the case.
Thanks
If your a young pup with kids at home, that should be the case (higher tax bracket). Even if you salary stays the same, you won't have the child tax credit forever, eventual you'll pay off the mortgage (hopefully) that just about kills most people itemized deduction, these just to name a few and more will lead to more income being taxed. So even if by chance you don't go into a higher tax bracket your effective tax rate will be higher.
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