Roth TSP, Is it a mess?

[Hamhocs]

I was expecting to see 2 separate accounts on the TSP website. But my account only shows one. Roth and Traditional are combined into one total. The only trace of ROTH is in the Contributions tab. But how will the ROTH money be tracked? Let's say you contribute $500 in a period. $250 to Traditional and $250 to ROTH. Matched contributions of $250 would give you $500 to Traditional and $250 to ROTH for a total of $750 for the period. All of this goes into the C Fund, where you had $0 before the new contributions. You make a transfer of 50% G/50% I. Where is your ROTH money now? Is it in G or I? This is a big deal. There's no way to specify your preferences. Anybody else looking at their accounts and see this as being a flaw?

 

[Sensei]

Well, you're ahead of me in the game for even having been able to elect Roth contributions. DODEA (my employer) doesn't even have that part up and running yet.

Good luck - I'll be following to see what others say. I'd like to start putting some into Roth soon, assuming it isn't too much of a mess.

 

[Hamhocs]

Ah, nevermind, I just found this post by USCfanhawaii in another thread. I hope they do change it so I can see both balances though.

"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:

 

[domingo3]

I was expecting to see 2 separate accounts on the TSP website. But my account only shows one. Roth and Traditional are combined into one total. The only trace of ROTH is in the Contributions tab. But how will the ROTH money be tracked? Let's say you contribute $500 in a period. $250 to Traditional and $250 to ROTH. Matched contributions of $250 would give you $500 to Traditional and $250 to ROTH for a total of $750 for the period. All of this goes into the C Fund, where you had $0 before the new contributions. You make a transfer of 50% G/50% I. Where is your ROTH money now? Is it in G or I? This is a big deal. There's no way to specify your preferences. Anybody else looking at their accounts and see this as being a flaw?

Hamhocs (or anybody else), I'm curious if the entry for "TSP Contributions" really is just contributions or if it includes growth. For tax purposes during withdrawl, just knowing the TSP contributions doesn't cut it. In withdrawl, your roth contributions and their growth are supposed to be tax free. I understand that right now, allocations stay the same across traditional and Roth, but given that contributions to the two are not likely to be in consistent proportions throughout the life of the account, and many of us had a pre-existing traditional balance, I don't think that the calculation of how much is tax free would be straighforward if all you have to work with is a number for Roth TSP contributions. I hope they get their accounting straightened out on this.

 

[uscfanhawaii]

Ah, nevermind, I just found this post by USCfanhawaii in another thread. I hope they do change it so I can see both balances though.

"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:

Yes! I was VERY disappointed in the details of the Roth TSP. The FTRIB rules pretty much negate the benefits of Roth, at least as far as my strategies are concerned. I was excited about Roth TSP when it was first proposed, but now I have decided to stay OUT of Roth TSP......and continue to contribute to my Roth IRA instead (outside of TSP, of course.) The Roth IRA gives me the options I need to tax diversify where Roth TSP does NOT.

Only drawback I can see is that Roth IRA is limited to a lower amount than Roth TSP.....but I don't think I can swing putting away that much anyway.

 

[uscfanhawaii]

Here is another link explaining how the Roth TSP should work: TSP Roth Option: Questions Answered . It is more in plain language, and does say that there will be a separate total of funds in Traditional and Roth TSPs. It also explains why you have to start taking the Roth portion out at 70.5 yrs (when a Roth IRA has no such withdrawal requirement. Apparently the law reads that all employer plans must start distributing at 70.5 whether traditional or roth.) It also links to other Roth articles. Good reading!

 

[SkyPilot]

It seems that they have constructed the Roth TSP for the convenience of the accounts rather than being useful for the participant. How many millions of TSP funds were spent on this project?

 

[wvango]

Matched contributions of $250 would give you $500 to Traditional and $250 to ROTH for a total of $750 for the period. All of this goes into the C Fund, where you had $0 before the new contributions. You make a transfer of 50% G/50% I. Where is your ROTH money now? Is it in G or I? This is a big deal. There's no way to specify your preferences. Anybody else looking at their accounts and see this as being a flaw?

Whatever you do to your Traditional with automatically change your Roth to the same. They move togther..