ROTH TSP

[chadalac]

Does anyone have any information about TSP introducing a ROTH TSP? I got a letter with my last statement saying that they were gonna implement a ROTH TSP and was wondering if anyone had any additional information on it?

 

[James48843]

Note-

There is an excellent article today in Government Exec .com about developing a TSP withdrawl plan- now that you're buidling up your next egg, what should you keep in mind when deciding how to withdraw the money?

I learned something I had not known before, and I think everybody would benefit in reading the article.

The thing I did not understand, is that there are some additional rules when talking about the tax status of Roth TSP withdrawls-

Read this article by Tammy Flanagan:

• The earnings associated with after-tax Roth TSP contributions are paid tax-free only if five years have passed since Jan. 1 of the calendar year in which you made your first Roth contribution, and you have reached age 59½ or have a permanent disability.

Luckily, I started putting money into Roth a couple of years ago- but if I had continued on my plan without really looking hard, I would have violated this, as I planned to retire about a year before I would have been able to qualify for the 5 year thing. Now I am going to have to plan carefully so that I don't inadvertently do something stupid.

Read the whole article here- which contains a LOT of great information about planning WHEN to start taking out the money, and which ways you should consider doing so:

Developing a TSP Withdrawal Plan - Retirement Planning - Pay & Benefits - GovExec.com

It's good stuff, AND WELL WORTH THE READ!

 

[alevin]

Yep, 5-year rule thing. My accidental contributions to Roth tsp catchup this year (before I caught and stopped the roth-tsp catchup contributions), meant that under the existing regulations, I would have to draw proportionately from roth and tsp same time if I did any withdrawals at all! Which means I would have had to wait 5 years from this year to make any tsp withdrawals at all, or else pay penalty on the Roth for early withdrawal of the proportional Roth, even though I didn't want to withdraw any Roth.

Under the new rules, we will be able to withdraw from either regular tsp or Roth-tsp separately, not forced to withdraw from both same time. Which means I can begin withdrawing from the tas-deferred tsp account within the next 5 years without roth-tsp negative consequences. hallelujah! they finally got smart about one of the many reasons people have been moving out of tsp into private accounts post-retirement.

 

[evilanne]

Good article James! Developing a TSP Withdrawal Plan - Retirement Planning - Pay & Benefits - GovExec.com

The online forms are much easier than filling out the form by hand. Only downside is it does not save the selections if you need to go back and change it and the withholding section could be improved. Withholdings are paid based on filing status and the amount TSP pays you which may leave you with tax liability when combined with your other income.

With new tax bill being signed and TSP modernization, anyone considering changing part or all of your contribution to Roth? I would if I was still employed. The proportionality rule prevented me from considering. With the change, you can also exclude Roth indefinitely which is one of the basic advantage of Roth that previously was not available in TSP for RMDs at 70.5