Max TSP and Roth IRA in same year or is the 15,500 a total Cap?

[C5R UZR]

Can I put $15,500 in TSP and still max my Roth IRA ($5000 this year)? Does anyone have it in writing because I haven't seen anything that would prevent it, but I don't really know where to look. I'm single and make less than the Roth cutoff ($99,000 AGI). Thanks

 

[luv2read]

Yes you can. However, I've found conflicting information on a couple of websites that state deferred investments are cumulative up to the IRS limit, which would seem to mean you couldn't. Confusing. Roth is NOT deferred. If anyone has definitive information, please post. IMO (and several others here) the best plan is:

1. Sign up for TSP matching (5%).
2. Max your Roth.
3. Then if you want to put more in TSP up to the $15,500, go ahead. OR:
4. Since we're limited to just two unrestricted IFT's per month, put that extra money to work in investments that allow more control.

 

[GarySpicuzza]

luv2read wrote:

Roth is NOT deferred.

luv2' the earnings of a Roth IRA grow tax deferred.

The contributions are NOT tax deductible like a Traditional IRA, but when you take retirement money out of the Roth IRA it's not taxable income and there isn't any required minimum distribution (RMD) at age 70 1/2.

See THIS link.

Roth IRA contributions are not tax deductible and are not reported on your tax return. On the other hand, you do not have to pay tax on any qualified distributions, distributions that are a return of your regular Roth IRA contributions, or distributions that are rolled over into another Roth IRA.

There are other non-qualified pension plans that do not have any contribution limits, nor do they have an age 70 1/2 RMD. The funds all grow tax deferred but the 10% penalty for early withdrawals prior to age 59 1/2 is applicable.

 

[luv2read]

luv2read wrote:

luv2' the earnings of a Roth IRA grow tax deferred.

The contributions are NOT tax deductible like a Traditional IRA, but when you take retirement money out of the Roth IRA it's not taxable income and there isn't any required minimum distribution (RMD) at age 70 1/2.

See THIS link.


There are other non-qualified pension plans that do not have any contribution limits, nor do they have an age 70 1/2 RMD. The funds all grow tax deferred but the 10% penalty for early withdrawals prior to age 59 1/2 is applicable.

I beg to differ. Roth earnings are not tax deferred, they are tax EXEMPT. You pay taxes up front on your contributions. Thereafter, the balance AND earnings are tax exempt. That's the difference between a Roth and a regular IRA, which is tax deferred.

 

[GarySpicuzza]

Yes, you are correct and well said!

My interpretation of your statement:
"Roth is NOT deferred."

I took that as you meaning you have to pay tax on the growth inside the Roth IRA with is not correct and you are correct there isn't any income taxes due upon withdraw.

Tax Exempt would only apply to the earnings inside the Roth as the principal was already taxed as income.

I love this site!

There is better exactly correct information on this site then there is on other financial sites and if you mis-type, mis-interpret or use an incorrect word someone is right there with the exact correct information!

 

[Show-me]

Can I put $15,500 in TSP and still max my Roth IRA ($5000 this year)? Does anyone have it in writing because I haven't seen anything that would prevent it, but I don't really know where to look. I'm single and make less than the Roth cutoff ($99,000 AGI). Thanks

Yes, TSP is governed under 401k rules and Roth is governed under IRA rules. Two different animals with two "separate" limits.

$15,500 plus $5000 = $20,500.

 

[Show-me]

Plus catch up contributions for the old folks.