Roth TSP

[domingo3]

Does anybody know anything about the future of Roth TSP (or have a guess)? I've been trying to watch HR 1108, but haven't seen any status change there. I guess congress has it's hands full with other things right now. I'd prefer if Roth TSP got added on its own instead of bundled with a bunch of other stuff, but either way, I'd like a Roth option.
If anyone knows anything or has insight into this, I'm all ears.


Thanks

 

[James48843]

Roth is likely, but not for this year.

Thrift Board has discussed this several times in meetings. Greg Long says he's not sure if there would be a demand for it, although several members of the board have suggested moving it forward. Long asked earlier this year for more time to study it, the ramifications of it, and how it would be done.

They ended up this year recommending it be included in legislation, and that is how it ended up in HR 1108. That passed the house, but has died in the Senate. Any action yet this year on it in the Senate is very unlikely.


My best guess is Roth will happen, but probably not until 2009, and maybe not until late in the year

Congress is done for the year now for the most part. Anything will have to wait until next Congress, and it will be more than likely that there are other, more pressing things for the next Congress to start off with.

The good news is that both the Roth issue, and a "self-directed window" included in the HR1108 legislation, as well as a provision for Sick Leave Buyout for FERS has Senate Democrat attention. Assuming a major sweep for the Dems as is projected, this legislation is very much likely to survive to be reintroduced by the next Democratic held Congressional session.

I think we'll probably see it again in the House in the spring, and then in the Senate by next summer. Not the first thing out of the box in the new year, but somewhere in the middle of the session, and it should pass.

then- who knows- it may take the TSP Thrift Board a few months to get the software updated, and produce materials for people before it is released.

My best guess- Roth will become available as a Christmas special next year.

Ho Ho Ho.

 

[domingo3]

Thanks for the scoop. That really helps me out.

 

[roskopfm]

The TSP Board takes so long to make decisions. They have been "talking" about adding a ROTH 2 years ago. Why in the world does it take them so long to get on board with this and ask Congress to approve it back in 2007. Thats the government for you. This would be a great time to invest in the stock market tax free going forward with the market down so much.

 

[Show-me]

Did not take them long to take away our unlimited IFT's.

 

[domingo3]

My understanding is that the board considered Roth two years ago, but decided not to pursue it, so they did not ask Congress at the time. I'm hopeful that this now will happen sometime soon.

In the meantime, I have reduced my contributions and am saving the balance in a taxable account. (Holding my breath for change, so to speak) When Roth comes, I'll max it out until I make up for lost time. This makes sense for me, since I'm only in the 15% marginal tax bracket, so deductions are of minimal benefit.

Limiting IFTs didn't require a change in the tax law, so you can't really compare the two in terms of time to implement.

 

[Show-me]

My understanding is the law is already in place and the private sector is already doing it. We just need the FRTIB and TSP to get off their asses and do it. Congress will fall in line, they are under the same system. They know how to vote on their own pay raises and they will like this one too.

 

[Callme_CO]

gotta question. If i max out my TSP can i contribute to an outside ira to? a buddy of mine went to see an accountant about that and he said that if he maxed his tsp he wouldn't be able to contribute to an outside IRA.

 

[domingo3]

Show-me - yes private sector is already doing Roth 401k, but TSP wasn't included in the law.

CallmeCO - Advise your friend to fire that accountant. My daughter's goldfish gives better financial advice.

 

[Mike]

gotta question. If i max out my TSP can i contribute to an outside ira to?

The IRS rule applies to all tax deferred accounts. If you reach the contribution limit on one (i.e. your TSP), you cannot contribute any additional money to the other(s). However, you can contribute to a Roth (after tax) IRA, provided that you meet the income requirements.

 

[roskopfm]

Maybe if we all fax the TSP asking for the ROTH maybe they would get the message. I fax them the same page once each month. It more people did, they might get the message.

 

[tsptalk]

That's good - now that most TSP'ers would rather never be in stocks again.

I think I would roll mine into the Roth. I haven't decided, I'll just need to read the fine print if/when it's in place.

 

[Rod]

That's good - now that most TSP'ers would rather never be in stocks again.

I think I would roll mine into the Roth. I haven't decided, I'll just need to read the fine print if/when it's in place.

If my thinking is correct, this would mean they would then tax our current funds already in our TSPs prior to converting those to a Roth, right?

In turn, the gov. would have more immediate funds in their coffers and we would have less in our TSPs. I'm sure that's one reason and incentive for the gov. to do this.

But yeah, I wouldn't mind paying taxes NOW in order to receive tax-free withdrawals. I'd support a Roth, even though the gov. is not doing it in our best interests, but in its best interests.

 

[CountryBoy]

Question, I'm assuming that we would have to stop contributing to our personal ROTH's outside of our current TSP or would this be in addition to? And what would the TSP Roth invest in to increase the value of our investment or has that not been determined yet? And would we get the 5% match with each paychecks contribution? Or are these details yet TBD.

Thanks,
CB

 

[Rod]

Question, I'm assuming that we would have to stop contributing to our personal ROTH's outside of our current TSP or would this be in addition to? And what would the TSP Roth invest in to increase the value of our investment or has that not been determined yet? And would we get the 5% match with each paychecks contribution? Or are these details yet TBD.

Thanks,
CB

I believe I can at least answer one of your questions. You can have as many Roths as you wish, as long as you do not exceed the IRS contribution limits which apply to yourself.

Now that I think about it, I don't believe I would convert to a Roth TSP because I already have a Roth Scottrade which I fully contribute to.

I'd MUCH rather fully fund a Roth that has NO restrictions on the number of trades than have a Roth that you can trade only twice a month.

 

[CountryBoy]

I believe I can at least answer one of your questions. You can have as many Roths as you wish, as long as you do not exceed the IRS contribution limits which apply to yourself.

Now that I think about it, I don't believe I would convert to a Roth TSP because I already have a Roth Scottrade which I fully contribute to.

I'd MUCH rather fully fund a Roth that has NO restrictions on the number of trades than have a Roth that you can trade only twice a month.

Thanks Rod,

That was my initial impression on first blush, but since I max out my ROTH annually the TSP ROTH isn't an option to me, since like you, "I'd MUCH rather fully fund a Roth that has NO restrictions on the number of trades than have a Roth that you can trade only twice a month" - Rod

Thanks,
CB

 

[ChemEng]

Thanks Rod,

That was my initial impression on first blush, but since I max out my ROTH annually the TSP ROTH isn't an option to me, since like you, "I'd MUCH rather fully fund a Roth that has NO restrictions on the number of trades than have a Roth that you can trade only twice a month" - Rod

Thanks,
CB

Have you found a place for your Roth with expense ratios as low as TSP?

IMHO-The trade restrictions are a red herring here because most brokerages have much more stringent trade restrictions than the TSP now has. (Required minimum amounts of time in a fund, penalties for leaving within a certain time period, not being able to go back into a fund traded out within a certain time period, et al)

 

[domingo3]

There appears to be a lot of confusion around these issues. I don't "know" any of the following, because Roth TSP doesn't actually exist, but these assumptions are based on Roth 401ks, so it should be very similar.

The investment options should be identical inside Roth TSP. The only difference is the tax treatment.

You will likely not be able to convert between "traditional" and Roth TSP - ie you won't be able to pay tax on what's currently in your TSP account and make it Roth TSP. You can just elect to make future contributions to Roth TSP.

Employer match should be unaffected. If you choose to contribute to Roth, the employer match will likely still go into a tax deferred (traditional) account.

Just because you max out a Roth IRA does not mean that Roth TSP is not an option for you. Roth TSP (should it come into existence) should have the same limits as traditional TSP limits, so you can contribute $5k to a Roth IRA, and up to another $16.5k for Roth TSP.

The decision comes down to tax rates. The Roth option is most beneficial for military folks like me, who are only in the 15% marginal tax bracket (some of us are even lower than that). If you're in the 25% or higher brackets, then it's more of a guessing game about where tax rates are going in the future.

 

[ChemEng]

You will likely not be able to convert between "traditional" and Roth TSP - ie you won't be able to pay tax on what's currently in your TSP account and make it Roth TSP.

Perhaps you would be able to carry losses forward from your standard TSP account to offset the tax burden of converting into the Roth account?

 

[CountryBoy]

Have you found a place for your Roth with expense ratios as low as TSP?

IMHO-The trade restrictions are a red herring here because most brokerages have much more stringent trade restrictions than the TSP now has. (Required minimum amounts of time in a fund, penalties for leaving within a certain time period, not being able to go back into a fund traded out within a certain time period, et al)

I purchase individual divvy paying stocks for our ROTH's and have done better than anything the TSP has. When the TSP allows that, then I'll consider putting my money with barclays and their underlings. Until then it's all I can stomach to give them my 5%.

I can make as many trades as I want, at a cost, but that's all we wanted with the TSP was the same thing and most of us were willing to pay for the trades, so that is a moot point in my situation.

CB