ROTH TSP Education Materials?

[Frixxxx]

Everyone,

I'm not saying anyone is wrong or right here, but the TSP Roth explanation is provided here:

TSP-BULLETIN

Remember, there are TAX IMPLICATIONS based on how contributions and employer matchings are made.

This is from TSP.GOV

 

[domingo3]

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.

Not quite sure what's conflicting. The reference posted by Frixxxx is good.

In my opinion, the way this works is pretty straightforward from an individual employee standpoint (do I want my TSP deductions to show up as "deferred" on my LES, or do I want to select the Roth option and forgo the tax deferral). That's not to say that you don't have to carefully consider your own tax situation.

Fortunately, I don't work in payroll, so I don't know how much of a nightmare they are really having trying to bring systems online to deal with this. As I said, I think for the individual employee, there is not all that much to it. Roth 401Ks have been around for a few years now, and Roth TSP will work very similarly, so if you want to seek out some experience, find someone you know or read an article by someone who has a Roth 401k option.

 

[domingo3]

Anybody who frequents the tsp.gov website more than I do have a guess as to whether we'll see the "Education Materials" posted electronically when they post our annual statements on tsp.gov, or might it only show up in our snail mail? (I never got that DVD years ago...)

 

[roskopfj]

There isnt much to it. Same principal as a ROTH IRA. In our case, they take it out of our checks after tax. Our W-2 isnt reduced by the contibutions. When you pull it out when you retire its tax free. What you have to decide is if the tax rate you pay when you retire will be higher than now. With the high deficit, its obvious tax rates will rise. To me the Roth TSP is a no brainer. Pay now=Pay no more ever again. Im going 100% Roth TSP

 

[domingo3]

I understand how to make decisions about Roth TSP, and I know I want it. I'm just curious to see what TSP puts out and how it will be implemented.

 

[wvango]

NEW Bulletin Just out discussing TSP Roth. These should be coming out with your annual statements as well.

Bulletin 12-U-5
2011 Thrift Savings Plan Annual Participant Statements with Roth Introductory Information Enclosed - https://www.tsp.gov/PDF/bulletins/12-u-5.pdf

Bulletin 12-5
2011 Thrift Savings Plan Annual Participant Statements with Roth Introductory Information Enclosed- https://www.tsp.gov/PDF/bulletins/12-5.pdf

 

[pokerstar629]

NEW Bulletin Just out discussing TSP Roth. These should be coming out with your annual statements as well.

Bulletin 12-U-5
2011 Thrift Savings Plan Annual Participant Statements with Roth Introductory Information Enclosed - https://www.tsp.gov/PDF/bulletins/12-u-5.pdf

Bulletin 12-5
2011 Thrift Savings Plan Annual Participant Statements with Roth Introductory Information Enclosed- https://www.tsp.gov/PDF/bulletins/12-5.pdf

Looks like we can contribute up to the $17,000 max into the Roth TSP, the question I have is: Can we withdraw the contribution (not earnings) from the Roth TSP like we can from the Roth IRA before the age of 59.5 without the 10% penalty?

 

[weatherweenie]

I'm confused about the TSP Roth. Once you put money into the TSP Roth, how is it invested? Or, what is it invested in? Do we only have the options of putting TSP Roth funds into C, S, I, G and F funds?

 

[nasa1974]

There is a video on the TSP website about the Roth. I have attached the link to the website.



https://www.tsp.gov/whatsnew/roth/index.shtml

 

[weatherweenie]

There is a video on the TSP website about the Roth. I have attached the link to the website.

View attachment 17710

https://www.tsp.gov/whatsnew/roth/index.shtml

Thanks. Saw there is a video, but can't watch it at work. Hopefully someone can summarize the investing options.

 

[James48843]

Here is the video- captured and reposted as a YOUTUBE.

I don't know why the TSP doesn't use Youtube. That makes is so much easier- it's not blocked by most agencies, and it is hosted on youtube servers with flash, instead of on FRTIB's servers, which are often blocked, and take way more bandwidth.

Enjoy the Youtube version:

 

[James48843]

I'm confused about the TSP Roth. Once you put money into the TSP Roth, how is it invested? Or, what is it invested in? Do we only have the options of putting TSP Roth funds into C, S, I, G and F funds?

Yes (plus the L funds, of course). It is exactly the same as a conventional TSP, except that you are using post-tax dollars instead of pre-tax dollars. And you will have a separate TSP account to log into.

You will have exactly the same investment options for the account balance money. Pick from G, F, C, S, I or any L fund.

 

[lacaprup]

There isnt much to it. Same principal as a ROTH IRA. In our case, they take it out of our checks after tax. Our W-2 isnt reduced by the contibutions. When you pull it out when you retire its tax free. What you have to decide is if the tax rate you pay when you retire will be higher than now. With the high deficit, its obvious tax rates will rise. To me the Roth TSP is a no brainer. Pay now=Pay no more ever again. Im going 100% Roth TSP

Not that much of a no-brainer. I fully expect my income per year in retirement to be less than what I earn now. I'll be retired! I should think I'll be at least 2 tax brackets below where I am now, and no matter how much marginal rates raise between now and then, I can't belieive it would be better for me to pay at my income rate right now.

 

[erdude]

Not that much of a no-brainer. I fully expect my income per year in retirement to be less than what I earn now. I'll be retired! I should think I'll be at least 2 tax brackets below where I am now, and no matter how much marginal rates raise between now and then, I can't belieive it would be better for me to pay at my income rate right now.

That's exactly what I'm thinking Iacaprup. It seems a no brainier to me to take the tax deferral NOW, but I HOPE to have amassed a nice sized retirement account and I would really like to see someone smarter than me "run the numbers". if I knew I would be getting some of those 2009 and 2010 returns maybe the Roth WOULD be better.

 

[travelingman]

Not that much of a no-brainer. I fully expect my income per year in retirement to be less than what I earn now. I'll be retired! I should think I'll be at least 2 tax brackets below where I am now, and no matter how much marginal rates raise between now and then, I can't belieive it would be better for me to pay at my income rate right now.

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Food for thought my tsp brother/s.., If taxes/tax brackets never go up, you may be on the right track. But, that’s if u r convinced taxes will not go up between now and retirement, or some years after you are retired... Remember, under Pres Carter, taxes were up into the 70% bracket..,Regan cut them in half.. Under the current economic conditions and that our national debt is rising every day..., it will have to be paid for eventually some how... Maybe, not at the old 70% tax rate, but definitely not at the current tax rates... Not sure why u think u will be two brakets lower than now, at retirment. Especially with all that money in your tsp acct...

Remember my tsp brothers, if u reach the 25% tax bracket by years end, this does not mean everything you made for the year is taxed at that rate....its an avg. of all the tax brackets up to that point ...GO TSP ROTH.....


[h=2]Federal Income Tax Brackets for 2012[/h]Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 2012:

Tax Bracket	Married Filing Jointly	Single
10% Bracket	$0 – $17,400	$0 – $8,700
15% Bracket	$17,400 – $70,700	$8,700 – $35,350
25% Bracket	$70,700 – $142,700	$35,350 – $85,650
28% Bracket	$142,700 – $217,450	$85,650 – $178,650
33% Bracket	$217,450 – $388,350	$178,650 – $388,350
35% Bracket	Over $388,350	Over $388,350

​

 

[nasa1974]

-------------------------------------------------------------------------------------------------------------------------------------------------
Food for thought my tsp brother/s.., If taxes/tax brackets never go up, you may be on the right track. But, that’s if u r convinced taxes will not go up between now and retirement, or some years after you are retired... Remember, under Pres Carter, taxes were up into the 70% bracket..,Regan cut them in half.. Under the current economic conditions and that our national debt is rising every day..., it will have to be paid for eventually some how... Maybe, not at the old 70% tax rate, but definitely not at the current tax rates... Not sure why u think u will be two brakets lower than now, at retirment. Especially with all that money in your tsp acct...

Remember my tsp brothers, if u reach the 25% tax bracket by years end, this does not mean everything you made for the year is taxed at that rate....its an avg. of all the tax brackets up to that point ...GO TSP ROTH.....


Federal Income Tax Brackets for 2012

Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 2012:

Tax Bracket	Married Filing Jointly	Single
10% Bracket	$0 – $17,400	$0 – $8,700
15% Bracket	$17,400 – $70,700	$8,700 – $35,350
25% Bracket	$70,700 – $142,700	$35,350 – $85,650
28% Bracket	$142,700 – $217,450	$85,650 – $178,650
33% Bracket	$217,450 – $388,350	$178,650 – $388,350
35% Bracket	Over $388,350	Over $388,350

​

Thanks travelingman

 

[FAAM]

I agree, taxes gotta go up; tax-break party can't go on forever... gonna have to pay for that party & knuckle-down to clean the mess up.
One other factor I'm thinking will have upward force on my after-Retirement taxes: I've been able to get deduct or credit for my home mortgage interest, yet I hope to have little or no morgage in retirement, and/or tax code will diminish or do away with the home-interest benefit... so my taxible annual income will go up proportionally, or relatively in retirement. Any feedback on that thought?

 

[domingo3]

I think if you're in the 15% marginal tax rate, it's almost a no-brainer to do the Roth. I can't imagine tax rates will go down.

Even at 25%, I think that the chances are very high that tax rates will be higher in retirement. You can't predict the future, but you can take a guess. Good point about having less tax mortgage tax deduction; you may also have more medical expenses or charitable donations.

In the end, there's no cookie-cutter answer. Everybody has to look at their own situation and it still requires you to guess about what will happen in the future. "Tax-diversification" is an applicable term. If you have a pension coming to you (which will be taxable), give yourself some flexibility by putting at least some money into roth. For me, I want to be able to put away more than the Roth IRA will allow me to, so I'll be doing some Roth option TSP as well.

 

[roskopfj]

For those of you with kids, here is something to consider. I am in the 25% bracket currently. I will be going part Roth, the reason is the effect on the child tax credit. If your adjusted gross income is above 110,000 you lose approximately 5% of the credit. If your income is 112,o000 you lose 2000*5%=$100 of the credit. So in effect any income above 110,000 I will be in a 30% effective tax rate. I am going roth to bring me right at 110,000. For me its a no branner. In todays dollars I will have Social Security check of approximatley 25,000, 35,000 TSP=60,000. yes that is the current 15% bracket, but if either spouse dies, that would be in the current 25% bracket. I will bet the current 25% bracket will be 40% in 10 years.

 

[roskopfj]

Roth Start Date

I called the TSP today and they are planning on starting the Roth on March 29th but may push it back a week. That means you cant elect it until that date, so it would be effective on your paycheck until the end of April.