Reply to TSP 401(k) vs. TSP Roth

Forum Index » Money and Finances

Reply to "TSP 401(k) vs. TSP Roth"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous]There are two or three other posts recently on this.  It is a new option, as of this year I think. You don't need to meet income requirements, but the rules are different in some relatively small ways (e.g. you have to take min. distributions, but you can just roll it over to a Roth IRA and then not take distributions).

It's not a bad idea to have some money in a Roth, but generally speaking, most us (perhaps especially those over 50 since the time horizon for tax rates to go up is shorter and especially those of us asking for advice on this forum) are going to be in a lower tax bracket in retirement.

One difference with a Roth is that the contribution limits are calculated on after-tax income, so if you have $7k and you would normally pay $2k in taxes on it, you can either put $5k in TSP, and $2k (less taxes) somewhere else (i-bond, ETF, mattress, groceries, vacation) or you can pay $2k in taxes now and put $5k in the Roth.  The difference is that you have "prepaid" your taxes in the Roth, so effectively you have set aside more in your retirement account (now, if you set aside the $2k to pay for the taxes you will owe when you withdraw from the TSP, there won't be a difference, so that is mostly an "advantage" if you have the extra $2k to spare but are not disciplined enough to save it).[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics