Planning for Retirement

[evilanne]

Don't underestimate the value of the Roth. For those who have have contributed 10% or more to their TSP accounts for many years, you may end up in the same or higher tax bracket after you retire. If you need to take a large withdrawal in retirement, it can easily place you into a higher tax bracket. What you really need is a withdrawal plan in retirement taking into account what happens when you reach 70.5 and are subject to Required Minimum Distributions (RMDs). Regular IRA/401k/TSP etc are designed to be expended during a single life time with RMDs. Roth accounts do not require RMDs and the tax free benefit can be passed on to heirs.

Make sure your beneficiaries know that they can transfer retirement accounts to inherited IRAs. They will be in shock for the taxes they will pay if they take the full distribution on a traditional retirement account in a single year. Roth is best option for leaving a legacy to the next generation. For Roth and after tax contributions (from deployments) in military accounts, it may be wise to make sure your beneficiaries are aware your contribution history.

For married individuals, look at the impact to your tax rate with your anticipated income & the difference between Married Filing Jointly and Single if your spouse dies. If your spouse is getting a 50% reduction to your pension, the impact is not as much but it depends on how much you have in your TSP/IRAs.

Another benefit of the Roth is that your beneficiaries do not have to pay tax and it continues to grow tax free, however, you need to meet the 5 year rule for this to be true--meaning that your first contribution has to be at least 5 years prior to your death for a non-spouse beneficiary or earnings will be taxable. A Spouse can assume Roth as their own.

 

[rakendzior]

correct....but plan to use the roths in about 10 years....if at all....easier to leave to heirs if i don't use it...can also be used strategically along with a traditional tsp or ira to lower your taxes...do not forget you hopefully have 30 years in retirement so the roth could really increase if you leave it alone for a while

The key to Roth type plans is time. Time to offset the fact that you already paid taxes on the earned income before you added funds and time to allow the funds to grow. Which in my opinion suggests by the time you are 50 (plus or minus a little) you should already have a Roth in place. After that, since you are likely earning more money and in a higher tax bracket, it might make sense to emphasize money into before-tax accounts.

If you expect to be in a lower tax bracket after retirement, then use that money first and let the Roth continue to grow and become a source of tax free income later in life. There is no best answer unless you have a crystal ball and know how your life is going to play out.

 

[alfaman]

correct....but plan to use the roths in about 10 years....if at all....easier to leave to heirs if i don't use it...can also be used strategically along with a traditional tsp or ira to lower your taxes...do not forget you hopefully have 30 years in retirement so the roth could really increase if you leave it alone for a while

 

[Scout333]

do not be so sure.....i will be in a higher tax bracket at 70 since that's what the RMDs start and so does my social security....so at this point i am putting more in my roth tssp than my traditional....found that out using the service i mentioned earlier...i am in my early sixties

Lots to consider but generally the closer you get to retirement and the less time you have to invest the less benefit you gain from the ROTHs. If you are a youngster and can start putting money in your ROTH early in your career you will usually benefit much more than someone who waits till later in their careers to contribute to the ROTHs. JMHO

 

[alfaman]

TSPmasters looks like it could be a good resource BUT webpage aesthetics are totally amateurish. He needs to lose the stupid pop-up chat window...Blocks 1/5 of the page that I am trying to view & no options to "X" out. So I didn't hang around long.


Anybody that begs to differ with me and has a solution to view Pete's full page, let's hear it.

kinda like the page..when you scroll down the popup chat seems to move out of the way...page had everything i needed, not too fancy and straight to the point...

 

[alfaman]

Yea, I'm a nurse, not a doctor and I won't ever be in that situation.
At 52 I think I'm making the right choice staying traditional, thanks for the reply and confirming it.

do not be so sure.....i will be in a higher tax bracket at 70 since that's what the RMDs start and so does my social security....so at this point i am putting more in my roth tsp than my traditional....found that out using the service i mentioned earlier...i am in my early sixties

 

[tom4jean]

Hello - ROTHs of any stripe can be good for you. But... As they evolved, it became apparent to me that once you reached age 50 or so, the tax paid up front wasn't offset by presumed taxable effect when you reached age 65 and beyond and were in a possibly lower tax bracket. Of course it depends on how long you actually live and your unique circumstances. I had a physician client, now deceased, who moved $2M of qualifed money, taxable money, into a ROTH after he retired. He had been an art collector during his lifetime, and gifted enough art to a local museum such that his tax bill on the $2M distribution was offset by the charitable gift. For most of us, that opportunity doesn't exist. Tony

Yea, I'm a nurse, not a doctor and I won't ever be in that situation.
At 52 I think I'm making the right choice staying traditional, thanks for the reply and confirming it.

 

[rakendzior]

TSP Roth vs traditional question. When the Roth was first available I went 100% in, but with further consideration I switched back to traditional deductions because the more I thought it about it I will be in a lower tax bracket when I retire and therefore pay less taxes on withdrawals. However, that does not take into consideration that I also end up being taxed on gains I made in the market. Wondering what would be the best approach? Thanks.

Sent from my Pixel 2 XL using TSP Talk Forums mobile app

Hello - ROTHs of any stripe can be good for you. But... As they evolved, it became apparent to me that once you reached age 50 or so, the tax paid up front wasn't offset by presumed taxable effect when you reached age 65 and beyond and were in a possibly lower tax bracket. Of course it depends on how long you actually live and your unique circumstances. I had a physician client, now deceased, who moved $2M of qualifed money, taxable money, into a ROTH after he retired. He had been an art collector during his lifetime, and gifted enough art to a local museum such that his tax bill on the $2M distribution was offset by the charitable gift. For most of us, that opportunity doesn't exist. Tony

 

[tom4jean]

TSP Roth vs traditional question. When the Roth was first available I went 100% in, but with further consideration I switched back to traditional deductions because the more I thought it about it I will be in a lower tax bracket when I retire and therefore pay less taxes on withdrawals. However, that does not take into consideration that I also end up being taxed on gains I made in the market. Wondering what would be the best approach? Thanks.

Sent from my Pixel 2 XL using TSP Talk Forums mobile app

 

[FAB1]

That's is view the full page without paying anything... :cheesy:

 

[FAB1]

TSPmasters looks like it could be a good resource BUT webpage aesthetics are totally amateurish. He needs to lose the stupid pop-up chat window...Blocks 1/5 of the page that I am trying to view & no options to "X" out. So I didn't hang around long.


Anybody that begs to differ with me and has a solution to view Pete's full page, let's hear it.

 

[nasa1974]

alfaman, congratulations on your upcoming retirement.

 

[evilanne]

Congrats alfaman on your upcoming retirement

 

[alfaman]

Well, i'm moving forward with my retirement...although i ran the numbers, i was concerned that my wife would not have enough when i die.......i went with a service: tspmasters, https://www.tspmasters.com/ who ran my numbers for various situations (including a doomsday market crash)

I was very pleased with the service, far beyond what my HR was doing...i thought i had all the angles when i ran the numbers,myself but i was not as accurate as i needed or wanted to be....i worked out for me becauses now my wife can really see (we are a one income family) that the kids and her have nothing to worry about...was thinking of holding out one more year, but will be retired, sipping pina coladas poolside within a few months

 

[tsptalk]

To respond to a question / post, simple use the "Reply with Quote" button below that post.

If you're using a phone app I don;t know for sure. It seems every phone's software is different.

This is Tony Kendzior. Thanks for your questions and your replies etc. I'm still working out the best way to respond to question so that the person who asked them gets my reply in the right context and doesn't have to ask them again. I know I understand money but as yet, I don't seem to understand how to use the TSP Talk forums. But I'm working on it...

 

[rakendzior]

Go to Successful Retirement Secrets, look for Tony's Blog, and when that comes up, find the About tab and there you'll find out more about me that you ever want to know...

 

[rakendzior]

They are not consecutive unless you have exactly 35 years. If you have 36 and #10 was zero, it will not be counted. If you have 34 years, then there will be a zero computed in the highest 35 average.

 

[PessOptimist]

This is Tony Kendzior. Thanks for your questions and your replies etc. I'm still working out the best way to respond to question so that the person who asked them gets my reply in the right context and doesn't have to ask them again. I know I understand money but as yet, I don't seem to understand how to use the TSP Talk forums. But I'm working on it...

TSPTalk uses vBulletin software which can be difficult at times. Sometimes replies to posts will go away. This is not necessarily due to the software or the web site server, there are so many factors involved with the interwebthingie.

Several questions may be asked in a post and replies to those post may ask more. The questions come fast and furiously.

This has been my solution to replies that has worked well for me. Under the post you want to reply to (not a reply to the post with or without a quote) select the Reply with Quote button. This should open a Quick Reply window and show the quote. Copy the quote and paste it in to a word processor. Go back to the Quick Reply window and select cancel. Now you can answer the question(s) in the word processor in your own time, leaving to research something if needed. When you are done with the reply copy it from the word processor and go back to the thread. Make sure you are still logged in, select Reply to Thread. A Quick Reply window will open. Paste what you copied from the word processor in to the window. Now select Go Advance in the bottom right. A Reply to Thread window will open and should show your post. Select Preview Post a little way down on the right. This will show you what the post will look like. If you need to make any corrections there will be a Your Message window just below you can edit. After editing select Preview post again. When you are ready to submit the post, scroll down to the Your Message window and select Submit reply.

Sounds complicated but it’s not really and will help preventing lost replies. Plus it gives you a chance to see your reply before it is submitted.

Depending on your equipment and software, right clicking the mouse may not give you copy/paste options. Using the keyboard commands control c and control v seem to work better.

PO

 

[PessOptimist]

uscfanhawaii, I forget to include this in the last post.:cheesy: There are 11 types of people in the world. Those who know binary, and those that don't, and those who don’t accept different number systems!!

PO

 

[PessOptimist]

Yes, ‘set in stone’ when you start receiving benefits. This is because all previous years’ income is indexed based on inflation. SS.gov has all the up to date index info if you want to get down into the details.
So what the chat advisor must have said is that your 2019 SS income is larger than the INDEXED SS income 35 years ago. Note also, I believe this 35 yr period is consecutive.
yes?

I understand when it is set in stone now. Thanks. The chat advisor didn’t actually say anything about the 2019 income. All I asked was for the PIA and didn’t know to ask for what month that was computed. I got the gross wage amount from my last LES so am not positive that is all actually ss income. Probably. I got the indexed amount from my ss earnings record and the indexing factor based on the national average wage index for the year I turned 60 and the 35[SUP]th[/SUP] year back. It is so close it probably makes little difference. I was an E-6 in the AF 35 years ago. The real factor will be what the COLA will be for 2019 if I don’t start receiving benefits.

I’m not sure I will go down in to the weeds and figure out my actual AIME for any given month.

According to the ss web site https://www.ssa.gov/oact/progdata/retirebenefit1.html “We use the highest 35 years of indexed earnings in a benefit computation.”.

PO