New poster here. I think this is the most helpful thread I have ever read on DCUM. Thanks, all.

Anonymous wrote:Roth IRA limits are based on adjusted gross income. Our HHI is $200k but our AGI is less than $178k so we can still do a Roth.

You're mising the point. The income limit is only a technicality now.

Anonymous wrote:Roth IRA limits are based on adjusted gross income. Our HHI is $200k but our AGI is less than $178k so we can still do a Roth.

Right, but sounds like TSP doesn't even have to worry about AGI, you can always do the Roth.

Roth IRA limits are based on adjusted gross income. Our HHI is $200k but our AGI is less than $178k so we can still do a Roth.

Anonymous wrote:

Anonymous wrote:I wouldn't do a Roth 401k at your income level unless you were absolutely sure it wouldn't affect your tax bracket or deduction phase outs.

Maybe, but see 11.59. There are huge benefits for some.

Don't you have until April 15 of next year to settle that issue? So wait until march and do your taxes both ways to see which is better.

I can see why conversion from a traditional to a Roth makes sense, although you'd have to look at how much to convert so you know you have the cash to pay the tax. To clarify on the TSP Roth though, you could put the entire $17,500 we're eligible to contribute this tax year (assuming no catch up contributions) into a Roth regardless of your HHI? And that's available to those with employer sponsored retirement plans (401k and TSP) but not IRAs?

Anonymous wrote:I wouldn't do a Roth 401k at your income level unless you were absolutely sure it wouldn't affect your tax bracket or deduction phase outs.

Maybe, but see 11.59. There are huge benefits for some.

I wouldn't do a Roth 401k at your income level unless you were absolutely sure it wouldn't affect your tax bracket or deduction phase outs.

Anonymous wrote:

Anonymous wrote:If you are high income and expect to stay that way there are other benefits to Roth's versus traditional IRA's. No mandatory withdrawals at age 70.5. $ just keep accumulating tax free, and no tax on withdrawal. And with regard to estate planning: The Roth doesn't have to be liquidated when you die; the beneficiary can withdraw it over an extended period, no tax. A bonanza for a young person.

It's a gross manipulation of legislative power for the benefit of the rich. But if you're eligible and can benefit, you might as well use it.

OP here. So I guess what I am really talking about it a Roth 401K, and not a Roth IRA. Is there any meaningful difference between the two? I don't think the TSP has any income limitations on eligibility...

If it's Roth, there is no difference
Everyone is eligible to contribute. Only certain low income people & self employed can deduct.
Roth is great since you do not have to take it out after certain age.
No tax paid on Roth distribution.
Roth can be given to children, taxfree.

Anonymous wrote:If you are high income and expect to stay that way there are other benefits to Roth's versus traditional IRA's. No mandatory withdrawals at age 70.5. $ just keep accumulating tax free, and no tax on withdrawal. And with regard to estate planning: The Roth doesn't have to be liquidated when you die; the beneficiary can withdraw it over an extended period, no tax. A bonanza for a young person.

It's a gross manipulation of legislative power for the benefit of the rich. But if you're eligible and can benefit, you might as well use it.

OP here. So I guess what I am really talking about it a Roth 401K, and not a Roth IRA. Is there any meaningful difference between the two? I don't think the TSP has any income limitations on eligibility...

If you are high income and expect to stay that way there are other benefits to Roth's versus traditional IRA's. No mandatory withdrawals at age 70.5. $ just keep accumulating tax free, and no tax on withdrawal. And with regard to estate planning: The Roth doesn't have to be liquidated when you die; the beneficiary can withdraw it over an extended period, no tax. A bonanza for a young person.

It's a gross manipulation of legislative power for the benefit of the rich. But if you're eligible and can benefit, you might as well use it.

Anonymous wrote:

Anonymous wrote:A few years ago, Congress created a work-around the income limits for contributing to a Roth IRA to help fund a tax cut. This workaround waived income limits for people who converted a traditional IRA into a Roth. It raised money in the near-term because the conversion itself was a taxable event. From a long-term perspective, however, it's a huge revenue-loser for the government since once the money is in a Roth it can never be taxed again (until Congress changes the law).

So, basically, people at about your income level, who earn too much to contribute outright to a Roth but suspect income taxes may be higher when they retire (because eventually we're going to have to get a handle on this national debt thing) have started to contribute to regular IRAs and immediately convert them to Roths.

Also, there are no income limits on Roth 401K contributions, I believe.

OP here. Thank you so much for this. So, does the Roth 401K (TSP) function the same as a Roth IRA? I'm confused because the money all goes tot he same place. It seems difficult to track which of my contributions were taxed already and which were not?

Yes, a Roth TSP would function the same way as a Roth IRA (except I'm not sure if you can withdraw money for things like education or a home purchase without penalty from a Roth TSP/Roth 401K like you can with a Roth IRA. Maybe you can, I just don't know for sure).

You don't need to worry about keeping the funds separate -- the plan administrator does that for you.

So say you have $100,000 in your TSP accumulated and you decide to start making contributions to the Roth TSP instead.

The $100,000 is left alone to grow (or lose) on its own. Another account line is created with the new money you contribute to the Roth TSP. Your principal contribution is also noted because the growth amount only is subject to a 10% penalty if you withdraw early for unqualified reasons. So, e.g. you contribute $10,000 to it over the course of a year and it grows to $12,000. If you had to withdraw the entire $12,000 for some unqualified reason, you'd pay 10% penalty on $2,000.

Anonymous wrote:A few years ago, Congress created a work-around the income limits for contributing to a Roth IRA to help fund a tax cut. This workaround waived income limits for people who converted a traditional IRA into a Roth. It raised money in the near-term because the conversion itself was a taxable event. From a long-term perspective, however, it's a huge revenue-loser for the government since once the money is in a Roth it can never be taxed again (until Congress changes the law).

So, basically, people at about your income level, who earn too much to contribute outright to a Roth but suspect income taxes may be higher when they retire (because eventually we're going to have to get a handle on this national debt thing) have started to contribute to regular IRAs and immediately convert them to Roths.

Also, there are no income limits on Roth 401K contributions, I believe.

OP here. Thank you so much for this. So, does the Roth 401K (TSP) function the same as a Roth IRA? I'm confused because the money all goes tot he same place. It seems difficult to track which of my contributions were taxed already and which were not?

A few years ago, Congress created a work-around the income limits for contributing to a Roth IRA to help fund a tax cut. This workaround waived income limits for people who converted a traditional IRA into a Roth. It raised money in the near-term because the conversion itself was a taxable event. From a long-term perspective, however, it's a huge revenue-loser for the government since once the money is in a Roth it can never be taxed again (until Congress changes the law).

So, basically, people at about your income level, who earn too much to contribute outright to a Roth but suspect income taxes may be higher when they retire (because eventually we're going to have to get a handle on this national debt thing) have started to contribute to regular IRAs and immediately convert them to Roths.

Also, there are no income limits on Roth 401K contributions, I believe.

I am a fed. I currently make 130K per year (200k) household. All of my retirement savings is in the TSP.

I keep hearing that I need to open a Roth IRA. But I've also heard that our income makes us ineligible. But then I've also heard that there is a way around that. And then I've heard that you can make "Roth contributions" into the regular TSP. I'm confused.

Does anybody have any insight?

Thanks in advance