Max TSP or Combo TSP + Mutual Funds/Stocks?

[Anonymous]

A total noob here. For a GS-15 in their 50s, is it better to max out their TSP contributions, or put in just 5% (for the agency match) and then put the remainder of what they would have put in (if they maxed out) into a no-cost mutual funds or stocks? How would a Roth figure into this? Thank you, and apologies if I'm mixing up the terms or otherwise unclear.

[Anonymous]

A Roth would be better than a brokerage account.

Whether to do a Roth or traditional TSP is basically a question of whether you want to prepay taxes (and possibly how much you want to pit into retirement savings).

If you don’t have traditional IRAs already I think a good compromise is to do all traditional for TSP and then do Roth IRAs (which would mostly be paid for by the tax savings on the traditional TSP). You probably need to do backdoor Roth IRAs though.

[Anonymous]

Anonymous wrote:A Roth would be better than a brokerage account.

Whether to do a Roth or traditional TSP is basically a question of whether you want to prepay taxes (and possibly how much you want to pit into retirement savings).

If you don’t have traditional IRAs already I think a good compromise is to do all traditional for TSP and then do Roth IRAs (which would mostly be paid for by the tax savings on the traditional TSP). You probably need to do backdoor Roth IRAs though.

OP here. Thank you! Just so I understand, put in the maximum for TSP, and then do a Roth IRA? I do have a traditional IRA. Could I convert that to a Roth IRA (is that a backdoor Roth)?

[Anonymous]

Anonymous wrote:

Anonymous wrote:A Roth would be better than a brokerage account.

Whether to do a Roth or traditional TSP is basically a question of whether you want to prepay taxes (and possibly how much you want to pit into retirement savings).

If you don’t have traditional IRAs already I think a good compromise is to do all traditional for TSP and then do Roth IRAs (which would mostly be paid for by the tax savings on the traditional TSP). You probably need to do backdoor Roth IRAs though.

OP here. Thank you! Just so I understand, put in the maximum for TSP, and then do a Roth IRA? I do have a traditional IRA. Could I convert that to a Roth IRA (is that a backdoor Roth)?

If you have an IRA already it gets much more complicated because any money you convert from traditional to Roth you will owe tax on the unrealized gains in your IRA.

In that case you could just do all traditional but if you have more money you are willing to save for retirement you just pick a ratio, like 60-80% traditional and the rest Roth just to have some Roth.

[Anonymous]

Max out TSP putting money in both traditional and Roth. Perhaps even do some TSP Roth conversions when they become available in 2026. Any other money in a brokerage account. With a Federal pension and SS you are setting yourself up to be in a high tax bracket when RMDs kick in.