ROTH TSP Education Materials?

[domingo3]

Has anyone received any education materials? One of the first arguments for delaying implementation was that TSP needed time to educate us on the options. Has anyone seen anything? I know that now the argument is that they need time to set up their systems to handle the changes. Whatever - I'm just wondering if I missed a mailing or something.

THanks,

d3

 

[Scout333]

Has anyone received any education materials? One of the first arguments for delaying implementation was that TSP needed time to educate us on the options. Has anyone seen anything? I know that now the argument is that they need time to set up their systems to handle the changes. Whatever - I'm just wondering if I missed a mailing or something.

Basic one pager from TSP. Not very helpful.
https://www.tsp.gov/PDF/formspubs/oc06-5.pdf

 

[uscfanhawaii]

Has anyone received any education materials? One of the first arguments for delaying implementation was that TSP needed time to educate us on the options. Has anyone seen anything? I know that now the argument is that they need time to set up their systems to handle the changes. Whatever - I'm just wondering if I missed a mailing or something.

THanks,

d3

I found a link to a TSP bulletin that has lots of info, and answered some of my questions. Apparently this was not made widely available to TSP'ers, but went to the Agency TSP Reps. It's a year old but I think the law was put in place in 2009, so these guidelines should still be applicable.
https://www.tsp.gov/PDF/bulletins/10-13.pdf
Some things that I found interesting:
1. NO transfers from Regular TSP to Roth TSP will be allowed. Only regular contributions to Roth TSP will be taken.
2. When you retire, you can transfer all or part of your Regular TSP to Traditional OR Roth IRAs.
3. The 5 year waiting period for taking out your Roth TSP contributions with no tax implecations starts with your FIRST Roth TSP contribution.
Get ready for April 2012!

 

[Atarrin]

=Get ready for April 2012!

Is it confirmed for April 2012? I've seen "Spring" everywhere.

 

[uscfanhawaii]

Is it confirmed for April 2012? I've seen "Spring" everywhere.

Yeah...'Spring' is the official time. I can't locate the article now, but when I was searching the web, I ran across one 'insider's' prediction of April, saying that the board would not concentrate on implementing the Roth option until January, and he thought that meant it would take til April to get out. So I will stick with that prediction......:blink:

 

[nasa1974]

Yeah...'Spring' is the official time. I can't locate the article now, but when I was searching the web, I ran across one 'insider's' prediction of April, saying that the board would not concentrate on implementing the Roth option until January, and he thought that meant it would take til April to get out. So I will stick with that prediction......:blink:

The Board hasn't met a deadline yet, except the 2 IFT limit. I would be surprised if the ROTH doesn't take affect much before September. Remember that you will not be able to transfer your TSP into the ROTH. You will have to start all over again. I haven't heard if you can use matching funds for the ROTH.

 

[Atarrin]

I haven't heard if you can use matching funds for the ROTH.

The initial guidance issued to agencies said all matching funds go to the traditional TSP fund (not the Roth).

 

[SteelSaving]

So the Roth TSP seems like a piece of junk.
So if I put the max into the roth, do I still get full matching funds, they just go into the traditional?

 

[domingo3]

So the Roth TSP seems like a piece of junk.
So if I put the max into the roth, do I still get full matching funds, they just go into the traditional?

Yes, this is the same way that Roth 401ks work. Matching funds must go into a traditional account. You can choose to put some or all of your contributions into the Roth version.

I wouldn't call it a "piece of junk". It's very good for people who are in a low income bracket now (especially military folks like me). It's also good for "tax-diversification". You never know what the tax system will look like during retirement. In all likelihood, your pension and traditional TSP/401k withdrawls will be taxed. It's a good idea to have some tax free money, too. Roth IRA is first priority, but if you want to put away more than $5k a year, Roth TSP is a good option.

I sure hope that the "educational materials" do a good job explaing this. While "consult your tax advisor about your situation" is not bad advice, it's not very helpful, and many people will be at a loss on how/if to take advantage of this option.

 

[uscfanhawaii]

I wouldn't call it a "piece of junk". It's very good for people who are in a low income bracket now (especially military folks like me). It's also good for "tax-diversification".

I LIKE that! 'Tax diversification'! That's a big reason I am looking at Roth (now, outside of TSP....but once it is in place, inside of TSP.) The other thing I like is not HAVING TO withdraw at 70.5 yrs. It will be nice to have at least some in Roth so there are more options.

 

[SteelSaving]

I fully understand why a Roth is a good option, I just wish the matching would go into it, especially since we can't transfer what we have now.

But yes, I will fund a Roth IRA first (hopefully this year, full $5k.) then consider the Roth TSP.

 

[roskopfm]

What many people dont understand is why the matching can not go into the Roth. Right now, many put in your TSP reduces your taxable income, and is taxed when you withdraw it. The money going into the roth tsp will not be reduce your taxable income. Its already included in your taxable income so when you with draw it earnings are tax free. This is the same with a ROTH IRA. You take $5000 from your checking account that you got taxed on already from your pay check and deposit in in ROTH IRA and the earnings are tax free.

Money that the goverment matches need to go in the regular TSP because they never tax you on this until you withdraw it. If they would let us put in the ROTH TSP then they would first have to increase or taxable income by the amount contributed. (which isnt happening). Either way ROTH or NON-ROTH the money has to be taxed.

 

[Birchtree]

My daughter selected a 401K Roth with her current employer - they also offer a % matching. Her Roth contains three large cap funds - we decided to stay away from small caps because of valuation. She is going to do just fine over the coming years. Build the position and take the growth tax free when the time arrives.

 

[daze823]

I am wondering why the comment Roth IRA first, then Roth TSP? Is it simply because of the control you have over your investments when investing in an IRA, or is there a financial gain to investing in IRA rather than TSP... In short, can't really afford to do both, but was considering starting Roth TSP when available.... Although I try and move my funds around enough to miss the big drops, i'm not really good enough at it to want to move them around more than 2 or 3 times a month.

Donnie

 

[SteelSaving]

What many people dont understand is why the matching can not go into the Roth. Right now, many put in your TSP reduces your taxable income, and is taxed when you withdraw it. The money going into the roth tsp will not be reduce your taxable income. Its already included in your taxable income so when you with draw it earnings are tax free. This is the same with a ROTH IRA. You take $5000 from your checking account that you got taxed on already from your pay check and deposit in in ROTH IRA and the earnings are tax free.

Money that the goverment matches need to go in the regular TSP because they never tax you on this until you withdraw it. If they would let us put in the ROTH TSP then they would first have to increase or taxable income by the amount contributed. (which isnt happening). Either way ROTH or NON-ROTH the money has to be taxed.

Excellent point! And that probably answers it, thanks!
Now, on to the next question that comes of it. Let's say I was contributing 5% and continued to. Now that 5% would be taxed. Does the matching equal the 5% before or after taxes? I am guessing they wouldn't try to screw us by making it equal to the post-tax value, but you never know. And I also know it would be easy to fix by just upping your contribution, but somebody could miss out on some money for a pay period.

 

[SteelSaving]

I am wondering why the comment Roth IRA first, then Roth TSP? Is it simply because of the control you have over your investments when investing in an IRA, or is there a financial gain to investing in IRA rather than TSP... In short, can't really afford to do both, but was considering starting Roth TSP when available.... Although I try and move my funds around enough to miss the big drops, i'm not really good enough at it to want to move them around more than 2 or 3 times a month.

Donnie

Control is the main thing, as well as options to invest in. I would still meet the matching from the government though, never miss out on the free money!
It is good you don't want to move your TSP around more then 2 or 3 times a month, because basically, that's all you can do (well, unless you are slowly pulling money to the G or taking advantage of the 1% rule).
In my case, while I'm funding the rIRA, I will not let it affect my current TSP contributions. Then, after I save up for next year's rIRA contribution (I plan to drop the $5k in as soon as I can in January each year) I will up my TSP contributions and leave it that way.
Now, I do have some credit cards I need to pay off before the interest comes due, otherwise I would be ready to put in $5k for last year before the deadline in April. And once paid off, I will only use credit for regular purchases, paid in full each month. Then any big purchases will need to be saved for first. But by the time I have saved up, I may decide to invest it instead.

 

[domingo3]

Excellent point! And that probably answers it, thanks!
Now, on to the next question that comes of it. Let's say I was contributing 5% and continued to. Now that 5% would be taxed. Does the matching equal the 5% before or after taxes? I am guessing they wouldn't try to screw us by making it equal to the post-tax value, but you never know. And I also know it would be easy to fix by just upping your contribution, but somebody could miss out on some money for a pay period.

Your contribution is your contribution. A 5% contribution will receive the same amount of matching either way. The only thing that changes is how much income tax you'll end up paying next April (2013). If you contribute to the Roth, you'll probably have a little bit more income tax withheld each pay period, but this is just an estimate of your taxes that will be due next year. It doesn't get deducted from your contribution, but rather your net pay. Uncle Sam just holds onto it for safe keeping until you file your taxes and calculate exactly how much you owe.

In a manner of thinking, ROTH TSP allows you to contribute "more" to your TSP. The contribution limit is still $17k per year, but $17k of money that won't be taxed upon withdrawl is worth more than $17k with a future tax bill.

 

[SteelSaving]

Got it, thanks!

 

[PessOptimist]

Lot's of conflicting information here. domingo3, where does your final word come from? Are you sure the various agencies that pay us can develop/track yet another catagory of deduction?

Just asking.

 

[daze823]

Lot's of conflicting information here. domingo3, where does your final word come from? Are you sure the various agencies that pay us can develop/track yet another catagory of deduction?

Once the systems are put in place, it won't be too difficult fot them to track another deduction.. The difficult part is when a mistake happens by agency and money has to be changed from one fund to another (non-tax to taxed acct, or vice versa), due to recalculating tax implications, especially when fix occurs in the next tax year. Taxes are the reason why auto 1% and any matching will go into pre-tax account, could you imagine having to recalculat taxes every time amended time card submitted, that's also the reason you can't transfer from regular to Roth TSP, it keeps processing simplified.