TSP vs. Roth TSP
IRA vs. TSP
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The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees and members of the uniformed services. It offers the same tax benefits that many private sector 401(k) plans offer, but with a few key differences. One common question that TSP participants may have is whether they can do a Roth Conversion within the TSP.
A Roth Conversion is a process that allows individuals to transfer funds from their traditional retirement accounts, such as a traditional TSP account, into a Roth account. The main advantage of a Roth account is that qualified distributions are tax-free, whereas distributions from a traditional account are generally taxable. Additionally, Roth accounts are not subject to required minimum distributions during the account holder’s lifetime, which can be advantageous for retirement planning.
Unfortunately, the TSP does not currently allow for Roth Conversions within the plan. This means that TSP participants cannot directly convert funds from their traditional TSP account into a Roth TSP account. However, this does not mean that TSP participants are completely unable to access Roth savings options.
One way for TSP participants to gain access to Roth savings is by utilizing the Roth option within the TSP. The TSP offers a Roth option that allows participants to make contributions with after-tax dollars. While these contributions do not provide immediate tax benefits, the earnings on these contributions grow tax-free and qualified distributions are tax-free as well. This can be a valuable option for individuals who anticipate being in a higher tax bracket during retirement.
Additionally, TSP participants also have the option to roll over funds from their TSP account into a Roth IRA. This process, known as an indirect conversion, allows individuals to move funds from their traditional TSP account into a Roth IRA, where the funds can grow tax-free and qualified distributions can be tax-free. However, it’s important to note that this process may have tax implications and individuals should consult with a financial advisor or tax professional before undertaking a rollover.
In conclusion, while TSP participants may not be able to directly do a Roth Conversion within the TSP, there are still options available for accessing Roth savings within the TSP framework. Whether it’s utilizing the Roth option within the TSP or considering a rollover into a Roth IRA, individuals should carefully consider their retirement savings strategies and explore the options available to them within the TSP. As always, it’s recommended to consult with a qualified financial advisor or tax professional to ensure that any retirement savings decisions align with an individual’s overall financial goals and objectives.
Does TSP has to convert to IRA and then to Roth IRA? We're not qualified to have IRA but have roth IRA account. Can we convert TSP directly to the roth IRA? Thank you
I've been wanting to switch contributions to Roth with m my wife's TSP for years, but her agency isn't helping with which forms to submit, or where to send them. Any body know which forms and who to send this to?
Thanks Dallen!
Always enlightening.
We don’t get a match on Roth I would do the 5% traditional and then rest Roth that way you get the full match. I do have a question are we allowed to contribute a lump sum into your Roth , let’s say from a savings or checking account
What's TSP
Take out a tsp loan and when paid back it's with after tax dollars so should be considered Roth after the loan is repaid right?
Why can't a conversion be from Traditional TSP directly into a Roth IRA (why does it need to park in a Traditional IRA first)?
When will the TSP start allowing the agency match amount to be matched as Roth? Isn’t it now allowable as part of the SECURE 2.0 Act? TSP doesn’t even mention it on their website and my agency doesn’t seem to know anything about it.
Functionally, a Roth Conversion and Backdoor Roth are the same. The only difference is WHY you’re doing it!
We’ll done. Learned a lot. Thanks for the efforts.
Good morning,
have a question on retiring prosses with Gov.. I put in for my retirement on March 17 2023. Received a text from my retirement counselor on September 18 2023. I retie on November 30 2023 and it is November 4 2023. I did text last week and the reply was I'm working on November retirement now. I am looking for any information on what the checking out prosses is, where or who I'm to get this from. My supervisor has been looking into this also. I am trying not to have some one tell me I was supposed to do this or that along time ago. My work has hired my replacement already and I am training them. Getting close and i am still lost in the prosses. Help needed. Thank You Mike V
Morning and thank you for what you do for us Federal employees. Question, Isn't it the law if I contribute to Roth TSP, the government match should also be in Roth?
At what age is it best to do a conversion? Should you do it a 59 1/2 or 55? I understand the tax bracket planning.
First! Was just talking about this topic the other day.