Roth TSP vs. Roth IRA: What’s the Difference?
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When it comes to retirement savings, there are many options to choose from. Two of the most popular are the Roth IRA and the Roth TSP. Both of these accounts offer tax-free growth and withdrawals, but they have some key differences that you should be aware of.
The Roth IRA is an individual retirement account that is funded with after-tax dollars. That means you don’t get a tax break when you contribute, but your money grows tax-free and you can withdraw it tax-free in retirement. The Roth IRA also has higher contribution limits than the Roth TSP, which is the Roth version of the Thrift Savings Plan.
The Roth TSP is designed for federal employees and is administered by the government. It’s similar to the Roth IRA in that it offers tax-free growth and withdrawals, but it has lower contribution limits and is only available to federal employees.
The biggest difference between the two accounts is the way they are taxed. The Roth IRA is subject to income taxes on withdrawals, while the Roth TSP is not. This means that if you’re a federal employee and you’re looking for a tax-free retirement account, the Roth TSP is the better option.
Another difference is that the Roth TSP has a matching contribution from the government, while the Roth IRA does not. This can be a great incentive for federal employees to save for retirement.
Finally, the Roth TSP has more investment options than the Roth IRA. This can be a great advantage for those who want to diversify their retirement savings.
When it comes to retirement savings, both the Roth IRA and the Roth TSP are great options. They both offer tax-free growth and withdrawals, but they have some key differences that you should be aware of. It’s important to understand the differences and choose the account that best fits your needs.
Did I miss the diference in limits on these 2 outside of income limits? I believe you can do larger amounts inside the TSP after maxing the IRA.
The new TSP window allow you to get other funds besides the traditional TSP funds
Can we have a financial mutant show special for us 20 year olds? Give us the numbers for being in the top 5%, 1% of people.
There are points made in this video, which the Secure Act 2.0 supersedes.
Thanks for clarifying high deductible plans. Prioritizing HSAs might not be for everyone.
The TSP is pretty sad for those of us who prefer to be more active with our holdings.
You can actually take out a TSP loan or completely withdraw contributions like the roth IRA, in certain cases. I.e down-payment, financial hardship, etc..
: )
I'm not military, but I've reviewed the TSP. The base funds in the TSP are pretty awesome. Few 401(k) plans have options that are better.
This isn't true they changed the TSP in June you can now invest in a ton of different things in stock market
The TSP does have target retirement funds.
I must have amazing insurance because I don’t understand hsa or high deductible insurance. I have insurance on my son and I for $40 a pay which is every other week. It says my out of pocket max is 1500/3000 for the year
Triple check that HSA. Federal options vary a bit by region and postal/nonpostal, but the basic options for federal employees aren't as heavily subsidized or generous as private sector, and Cadillac plans rarely come out ahead. My calculation was there were only very specific narrow windows of spending where you'd come out ahead with a non HSA. But with very low spending or very high spending my HSA plan actually comes out ahead.
I’m a letter carrier and we use TSP. Thanks for talking about it
Love this! More Federal Employee Videos Please!
The S&P 500’s equivalent in the TSP is the C Fund—just in case someone is wondering. Military guy here.
More Govt. employee focused videos please! One question, aren't RMD's for Roth 401K (and Roth TSPs) going away eventually with the Secure Act 2.0? That will be a huge factor I imagine in the future if retirees will leave their investments in a Roth TSP or rollover to a Roth IRA.
The TSP does have a Bond Index and a SP500 Index so if that's all you're gonna do anyways the TSP is fine.
Tsp C fund is a sp index fund. 80%C 20%S mimics VTI. Brian is being disingenuous by saying the tsp lacks options when the money guys usually just preach using a target date fund.