Roth/TSP question

[azanon]

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This article here on msn was interesting:
http://moneycentral.msn.com/content/Retirementandwills/InvestYourSavings/P34211.asp

Something in that caught my eye though, this part:

"Congress authorized Roth 401(k)s way back in the 2001 tax reform package but pushed the implementation date off to 2006.

You won't get to contribute more to your plan. The total that can be contributed would remain the same ($14,000 this year, $15,000 in 2006). But the worker can opt to make part or all of their contributions after-tax to get tax-free treatment later."

Apparently i misunderstood that max limit (13K last year) to just apply for TSP alone, but if i'm reading that right they really mean the max you can put in TSP PLUS your Roth IRA was 13K last year and 14K this year. Am I understanding that right?

 

[Mike]

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That is confusing. From the context of it in the article, I *think* she means that if a Roth 401(k) is part of your employer's retirement plan offered to you, the $14k cap applies to that plus your regular IRA...

I don't know, though. :*

 

[Rolo]

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I would think that it is independent of your other retirement plans just like the TSP is independent of Roth IRA contributions.

 

[azanon]

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OK yeah i see that now, its a "Roth 401K". So for this year 14K max to TSP (if your salary was high enough) + 4K per Roth IRA.

 

[Rolo]

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Right! Ima try to do that next year, max TSP to $14K and max Roth and SEP. I should prolly research AMT first, heh.

 

[azanon]

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If you can hit that max figure for your TSP, you've got a nice job. By my guesstimation, it'd take at least a stepped out GS-13 or better to pull that off.

 

[Mike]

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The average federal employee would have to request ~30% witholding to hit that maximum. :shock:

 

[Guest]

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Rolo, That is a very scary avatar. Isit a photo of John Wayne Gacy?

 

[Guest]

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greg wrote:

Rolo, That is a very scary avatar. Isit a photo of John Wayne Gacy?

Clever greg Rolo, What's going on with you?

Are you trying to fill the vacuum that MT left? I didn't know you were so... not sure how to characterize.. so aggressive?

 

[Rolo]

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Wonder Woman wrote:

Are you trying to fill the vacuum that MT left? I didn't know you were so... not sure how to characterize.. so aggressive?

Dahell are you talking about?

[line]

Mike, Az: My gov't job is not my only source of income.

 

[Guest]

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Rolo wrote:

Wonder Woman wrote:

Are you trying to fill the vacuum that MT left? I didn't know you were so... not sure how to characterize.. so aggressive?

Dahell are you talking about?

I thought you were getting to be a basher and attacker on different other threadsbut it's hard to make sense of all these different threads at times soif you're not aware of any changes forget I mentioned it.

 

[Rolo]

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Ummm....oooookay.

I dont' seem to be popular among the bitties. heh.


I guess MarketTimer left a legacy: quick usage of basher and attacker.

 

[James]

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azanon wrote:

If you can hit that max figure for your TSP, you've got a nice job. By my guesstimation, it'd take at least a stepped out GS-13 or better to pull that off.

This year I will be contributing just under $9000 to my TSP. But that is only because of the current limits. Next year there will be no limit on the amount of base pay that can be contributed to the TSP each month. So someone in my position and deployed for the entire year of 2006 could contribute in excess of $49,000 to the TSP if they are able to pay their remaining bills off of their BAH and BAS.

So I repose the question, what limits are there and what do they apply to?

Becuase I will be opening a Roth IRA shortly and would like to know what my limits are. If anyone could provide a good source for reading up on this, I would appreciate it.

 

[Dogdaddy]

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sheasljj wrote:

azanon wrote:

If you can hit that max figure for your TSP, you've got a nice job. By my guesstimation, it'd take at least a stepped out GS-13 or better to pull that off.

This year I will be contributing just under $9000 to my TSP. But that is only because of the current limits. Next year there will be no limit on the amount of base pay that can be contributed to the TSP each month. So someone in my position and deployed for the entire year of 2006 could contribute in excess of $49,000 to the TSP if they are able to pay their remaining bills off of their BAH and BAS.

So I repose the question, what limits are there and what do they apply to?

Becuase I will be opening a Roth IRA shortly and would like to know what my limits are. If anyone could provide a good source for reading up on this, I would appreciate it.

IRS limits apply:

2005: TSP $14,000 + $4000 Catch-up if over 50, Roth $4000 ($4500 if over 50)

2006: TSP $15,000 +$5000 Catch-up if over 50, Roth $4000 ($5000 if over 50)

Detailed info on www.tsp.gov and the IRS website www.irs.gov

 

[Rolo]

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The original question was about the new Roth 401(k), not the current Roth; they are not synonymous.

IRA limitations are independent of everything else ($4K, 20% for SEP).

TSP-imposed limitation (10%) goes away next year; however, the IRS limitation still stands ($15K next year).

I don't know anything about the Roth 401(k), good question.

 

[Mike]

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I might try 20% witholding.

 

[Rolo]

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Mike wrote:

I might try 20% witholding.

hehe...That's only on self-employed income. It's actually 25%, but since it works like a traditional IRA, you have to deduct your contribution before you count your income.

i.e.

$100 gross, contribute $25, net income = 100-25=$75, $25/$75=33%, too much.

$100 gross - $20 contribution = $80 net income; $20/$80 = 25%, but $20/$100 (the real income) = 20%.

Stupid IRS!

 

[Mike]

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With the percentage cap gone next year, I can get away with it.

I'll still be well under the raw dollar amount ceiling that the IRS imposes. I don't have to worry about that nasty AMT... yet. If I ever get some type of dwelling that involves a mortgage payment and an associated deduction for interest / property taxes, I might be on the hook if I keep up this ridiculous savings rate. :shock:

 

[ROTH_TSP]

hi az,
ROTH 401(k)s started 1 Jan. 2006
Please spread the word, ROTH TSP !!!
call your congressmen & follow up w/ e-mail
this would be a great addition to TSP-anyone reading this make that call
taxes are at there lowest levels in history, that won't last. everyone can use a tax-free account in case they need to make a large withdrawl without changing their tax bracket.
make that call--Thanks

 

[SkyPilot]

hi az,
ROTH 401(k)s started 1 Jan. 2006
Please spread the word, ROTH TSP !!!
call your congressmen & follow up w/ e-mail
this would be a great addition to TSP-anyone reading this make that call
taxes are at there lowest levels in history, that won't last. everyone can use a tax-free account in case they need to make a large withdrawl without changing their tax bracket.
make that call--Thanks

Don't need another Gov't program to do this... just take any contributions over your match and allocate them to the ROTH of your choice. Easy and available.