ROTH TSP Education Materials?

[Viva_La_Migra]

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.

I may be wrong, but I believe going Roth TSP will have no effect on your child tax credit, because the money going in is after tax income. You might be better off putting more into the traditional TSP, which reduces your current taxable income. Someone correct me if I am mistaken.

That said, I agree with you on putting money in that will be tax free in the future. Having some legal tax free income is a good thing to plan for. Then again, I don't trust politicians and wouldn't put it past them to change the rules and call my Roth earnings taxable as a capital gain.:suspicious:

 

[domingo3]

Re: 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.

Thanks for the info. I'm totally jealous.

 

[uscfanhawaii]

Roth TSP specifics

Wow, the details for the Roth TSP are coming out....and they are not as flexible as I had hoped/planned. see the article at TSP Roth Questions Answered .

You will NOT be able to put in different fund mixes for Roth TSP and Traditional TSP. All IFTs will affect both, in same percentages. You WILL have to start taking out Roth TSP when you turn 70.5, even tho you don't have to take out Roth IRAs. AND, when you do take funds out of your TSP, you will have to take out of BOTH the Roth and Traditional parts by the same %!!

I was planning to use the Roth TSP as an aggressive fund, and then count on it for tax diversification for when I start taking out. But these regs kinda negate BOTH my intended strategies!

Anyone condidering the Roth option should check out this article. I guess like everything in the government, the 'Devil is in the Details'!!! :blink:

 

[Mapper]

Re: Roth TSP specifics

VLM, you are correct in assuming that Roth contributions will not lower your AGI like Traditional contributions do. If you need to keep your income down for tax purposes, traditional is the vehicle you likely need. See the link uscfan posted. As always consult your tax professional before making any decisions.

 

[domingo3]

Re: Roth TSP specifics

Thank you for the link. April seemed to arrive quietly with no mention of the Roth TSP.

While I have no basis for my assumptions, I suspect that you will eventually be able to use both of your strategies eventually. I imagine that, in time, they will revise software to handle different IFTs and withdrawls. In a worst case scenario where nothing changes, you could roll your funds over to an IRA and Roth IRA respectively when you separate to allow for different allocation and withdrawl strategies.
Not sure what your time horizon is. For me, I'm sure there are other changes that will happen over the following decades that will have more impact on me than this, which I see as a transient limitaion.

Wow, the details for the Roth TSP are coming out....and they are not as flexible as I had hoped/planned. see the article at TSP Roth Questions Answered .

You will NOT be able to put in different fund mixes for Roth TSP and Traditional TSP. All IFTs will affect both, in same percentages. You WILL have to start taking out Roth TSP when you turn 70.5, even tho you don't have to take out Roth IRAs. AND, when you do take funds out of your TSP, you will have to take out of BOTH the Roth and Traditional parts by the same %!!

I was planning to use the Roth TSP as an aggressive fund, and then count on it for tax diversification for when I start taking out. But these regs kinda negate BOTH my intended strategies!

Anyone condidering the Roth option should check out this article. I guess like everything in the government, the 'Devil is in the Details'!!! :blink: