In this video, Jose Armenta, CFP® will cover whether you can have both a Roth TSP and Roth IRA and some of the differences between the two.
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If you’re looking to maximize your retirement savings, you may be wondering whether you can have both a Roth TSP and a Roth IRA. The answer is yes, and in fact, combining the two types of accounts can be a great way to diversify your retirement savings and take advantage of the unique tax benefits each type of account offers.
A Roth TSP, or Thrift Savings Plan, is a retirement savings plan offered to federal employees and members of the military. It is similar to a 401(k) plan in that it allows you to contribute pre-tax money to the plan and then grow that money tax-free in a variety of investment options. The main difference between a Roth TSP and a traditional 401(k) plan is that with a Roth TSP, contributions are made with after-tax dollars, and all withdrawals, including earnings, are tax-free in retirement.
A Roth IRA is an individual retirement account that allows you to contribute after-tax money and have it grow tax-free. Unlike a Roth TSP, there are income limits that determine how much you can contribute to a Roth IRA. Withdrawals from a Roth IRA are also tax-free in retirement.
Combining a Roth TSP and a Roth IRA can be a great way to diversify your retirement savings and take advantage of the unique tax benefits each type of account offers. Both accounts allow you to contribute after-tax money, but the Roth TSP offers the added benefit of being able to contribute more than the Roth IRA. This can be especially beneficial for those who are looking to maximize their retirement savings.
In addition, both accounts offer tax-free withdrawals in retirement, which can help you keep more of your money in retirement. And since the Roth TSP and Roth IRA both allow you to invest in a variety of investment options, you can diversify your retirement savings even further.
Overall, having both a Roth TSP and Roth IRA can be a great way to diversify your retirement savings and take advantage of the unique tax benefits each type of account offers. Just make sure to consider your individual situation and financial goals when deciding which type of account is right for you.
Which is better? Is it a good idea to have both or just Roth TSP?
Thank you for the short and sweet answer to my question – it’s exactly what I’ve been looking for. Keep making this content! It really helps.
I have a Roth Tsp and recently changed into it from traditional about 8 months ago and plan to continue the rest of my career with Roth tsp…so I only have a small portion of that as traditional comparing to the rest of my 28 years left to work!! But if your reading this remember that your matching amount Always goes into Traditional side of the buckets!! So down the road when you take out you will still have to pay taxes on that traditional side of the bucket!
I’m late but I have a question. Right now my income is low so Roth IRA is ok but once my income exceeds the income limit, can I just stop contributing and let the contributions I did before my income went over the limit sits there and grow and I’ll still be able to get it right? So instead of contributing to Roth IRA and Roth TSP, I can just focus on the Roth TSP until I retire??
Can you max out your TSP contribution, and then max out the separate but lower Roth IRA limit on top of that?
Thank you Jose, I did not know you can have both; Roth TSP and Roth IRA. I will be working on my TSP.