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Is it only 5% I could match or it could be any other number above 5% that could match? For example if I put 10% the gov. Will give me the 10% more
Roth wasn’t there when I first joined tsp w/ usps
Can I put 5%now in Roth tsp with 10% going in traditional tsp?
I though you cant go over 6k in roth
Thanks for the Video
How do state income taxes figure in? With the traditional, you save on state taxes as well as federal. That can be 5-10%. If you retire in a state that doesn't tax income, or exempts distributions.
Hello – I am 58 yrs old, retired 1/2022. I left my TSP money in G fund. Can I move it to ROTH IRA?
Ever think people need all their income just to survive.
Your arguments about the Roth ignore state and local income taxes, which complicate the argument for the Roth. For example, for income between $90k-$215k, NYC residents pay a marginal tax rate of 24% federal + 6.33% state + 3.87% city = 34.2% total when they contribute it to a Roth. But if they contribute it to a Traditional, and retire in the near future in FL or TX (where there is no income tax), they only pay the federal 24% when they withdraw the money. A difference of 10%. So in this scenario, Traditional is a better choice than the Roth.
Will I lose out on to much interest if I cut my traditional contribution down to zero and start putting it into a Roth and starting over?
Do you suggest it all can but transferred to Roth? Or is it too late to contribute to a new Roth with 2 to 4 years left to retire?
This is a great and very complete video!
Do special provisions aka federal law enforcement have to wait until 59 1/2 to access the Roth TSP funds? Or can it be accessed at let's say 52 years of age when I'm eligible to retire on a pension and d access my traditional TSP funds?
It would take a lot needed in the TSP even when factoring in the role of the pension to get back to the same marginal tax rate if you are a higher grade. Considering the savings levels of even government employees for retirement, most people won't reach the levels needed in traditional accounts for Roth TSP or 401k to 'make sense'. Roth IRAs make sense in tandem with a traditional TSP or 401k
Some people with a military pension and also a federal pension plus TSP and SS will actually jump to a higher tax bracket upon retirement. They may just eat the tax payment on the conversion in early retirement to benefit from the growth in the tax free Roth over the twenty or so years during retirement.
PLESE HELP… How do I change my contributions from Traditional to ROTH? I can't do it through MyPay or TSP websites… where/how do I change it?
He failed to mention that Gov tsp contributions are not limited to the 6,000 bucks non TSP Roth accounts are. You can contribute the entire 19,000 max per year all into your Roth!!! I learned only after changing my allocation after the first 6,000 to traditional for 4 years.
Then I was speaking to a TSP rep and she informed me that TSP Roth was not limited to that 6,000 max…
Since then, I’ve been maxing out 19,000 per year into my Roth TSP for over 8 years.
I’m shocked that more people do not take advantage of the Roth.
I’m also equally shocked at how many people go 20 years and never allocate out of the G fund… each time I run into someone who is about to retire and learn they are still in the G fund… I want to cry for them. Their accounts are so low compared to what they could have had..I’m talking several hundreds of thousands of dollar difference.
I was told you have to do 20 years AND wait until you're 60 inorder to get your money. Idk if it's true or not.
But will the Roth give the return that tradition will or is more like a savings account
Probably because they don't expect congress to honor the tax free withdrawal on the growth.
Regarding deductions, until the standard deduction is reduced for any reason it's unlikely a married couple would have enough itemized deductions to exceed the $24,000 standard deduction. So from our standpoint, itemized deductions don't even come into play when filing our taxes.
With that said, this is a great video on the benefits of ROTH contributions. For couples in the 22% tax bracket, it will be next to impossible to reduce one's annual income in retirement to step down to the 12% bracket so ROTH makes a lot of sense to me given the likelihood of the brackets being increased in the future. However, those currently in the 24% bracket could see their annual retirement income drop into the 22% bracket so ROTH contributions may not be ideal for those folks whereas, taxes on the traditional withdrawals would end up being a tax benefit because of the lower bracket during retirement.
I love these retirement planning discussions, even though I am not in TSP. The reason I watched this is that my daughter and her husband are just entering the TSP. They are both at the same pay rate. My opinion (their decision with their own planning obviously) was what if one chooses the Roth TSP and the other chooses the Traditional, each up to the 5% for the match. Then, each contribute to their own Roth IRAs. As incomes increase, keep ratcheting up until the personal Roth IRAs until maxed, then anything additional in the allotted household income for retirement planning, increase their TSPs over time.
For many of us on the low GS scale, if we go Roth, we lose a notificable chunk of our net. That is just something we cannot do. As we climbed the ladder, maybe. For me, it's around GS 10 that I can start going Roth. Around me, the Boomers hold the high GS levels. And they're all talking about working until 70. No thank you. I'll move to the private sector.
Another reason is there aren't any conversion opportunities from the TSP. I believe if employees could convert some of their funds, they would. Federal employees who have been working over 25-30 years have all of their money in the traditional and do not have enough working years left to make a big difference, especially since they are not allowed to convert. I believe that 20 years from now, your chart will look very different since those employees will have the Roth TSP option from day 1.
Amazing more don't use Roth TSP. I'm also about a year out, and didn't understand that whole Roth thing, thought earnings were still taxable. Now I have to do the dance to minimize post-retirement tax. Actually works out best, like 12% top after the dancing, to roll over to traditional IRA, then convert some to Roth IRA each year, still at 22% max tax, then live off pension, SS, dividends and some gains while balancing stocks and bonds each year.
Young-uns, switch contributions to Roth TSP and save yourself a lot of hassle!!!
Thanks for the video.
Unfortunately, I'm only a year away from retirement so I missed that one.
Remember the match is pre-tax so a bill is coming due even if you do Roth. The Roth TSP hits you in the take home pay. There's a couple of problems with understanding how to use the Roth. It takes about a month for the payroll change to take effect. There also isn't an effective "What If" calculator to see what you pay will be with your TSP elections. I've seen everything from 100% Pre-Tax to 100% Post-Tax (Roth) through trial and error. It took about 9 months to go through all the splits (.i.e. 50%/50% Roth, 75% Pre/25% Roth, etc.) Wouldn't it make sense to make your pre-tax deposits while working but convert that money by moving it to a Roth IRA upon retirement? I don't value tax certainty enough to pay more today than I can tomorrow. If someone were just starting out and had a lot of years to go, the Roth TSP may be more of a value.
I’ve bee retired from Federal Service for 5 years. IMHO, the Roth Option was included too many years too late, many years after it was introduced to the general public and thus too late in the careers of many to bother with the conversion and then wait 5 years for the Roth to vest. I own a Roth outside the TSP and use it as a growth vehicle, which you can’t do in the TSP because the investment options are really geared towards conservation of principal. Looking forward, I’d hope and expect, many people, early in their careers, would take advantage of the Roth in the TSP. Even though it is a lot less aggressive than individual equities, the matching contributions (which go to your taxable account) more than make up for that. Give it time….
I can think of a lot of reasons NOT to contribute to Roth over Trad. 1. I’m making the most money in my career so I’m using traditional to reduce my taxable income. 2. I do think tax rates will go up, however bracket sizes have also gone up over time which will allow me to withdraw more at one of the lower rates. 3. I will be able to contribute more to traditional than I would to Roth because I’m not paying taxes so when you do the math, I have a larger egg growing than a Roth contributor so I can afford to pay my taxes later and come out even if I were in the same bracket. 4. Most people in the US are taking the standard deduction! This means some of those deductions you mentioned are pointless. First, your TSP deduction wouldn’t be a deduction at all if it were ROTH. Second, Mortgage deduction is not applicable to anyone taking the standard deduction. Third, Children are mostly grown by later in your high earning years and even the one or two left are only worth a few thousand each, if that. Fourth, Charitable contributions aren’t counted for anyone taking the standard deduction, with the exception of 2020 where you could get a measly $300 charitable deduction even while taking the standard deduction. 5. I won’t need as much income in retirement as I do now since I will no longer be contributing thousands of dollars to my retirement when I’m retired. 6. Something as simple as having just 1 rental property will allow you to reduce your taxable income significantly, keeping you in the lower tax bracket in retirement. Have a look at the brackets… you can withdraw a large amount each year and remain in the lower bracket especially if you are married. Finally, I wish I were going to make half as much in retirement as you suggest, but my pension from USPS will be under $1500/month with 20 years of service! And SS is set to be reduced by the time i hit full retirement age according to the SS website! Even if they turn that around somehow, doubtful, I will still only get maybe $1800/month from SS. Unless I delay longer. Furthermore, my TSP won’t be 500k, so I might be withdrawing less than what you expect the average person will. Last I heard the average person had less than 100k in their TSP so perhaps you’re directing your video to the wealthier TSP participants.
Thanks for the clear explanation. Right now all my TSP is in traditional. I plan to retire within 5 years. Read somewhere that I have the option to convert all to Roth when I retire….any inputs on that?
Great info. Thank you.
I retired from DOD Federal service last July with nearly 35 years. I did an in service rollover of my TSP a year and a half before that. I had ROTH balance of zero. Why? Because I didn't trust that the greedy idiots inside the beltway wouldn't change the rules on ROTH taxation eventually. Think about it….have they ever been able to resist taxing ANYTHING?
The same reasoning is why I got my money out of TSP where I control it. They already have control of two legs of my retirement (SS and FERS). At least I have control of one.