tsp and roth

[pyriel]

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Mike,

It is true and not true. Coolhand said it right. Although, they said that contribution becomes unlimited, IRS (always the party pooper) had set a cap on it. I was informed by the TSP administrator here that it is capped at $15K. However, I thought that I read 25% of the individual's income.

Coolhand,

Where did you read $42K? Thanks...

 

[neirbod]

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Hi,

Like Coolhand said, the percentage contribution limit is lifted starting in 2006. But, the IRS still limits total dollar contributions. The limit will be raised to $14,000 in 2005, then to $15,000 in 2006. Sorry, it is not $42,000!

Here is a link to the info.

http://www.tsp.gov/features/def_contribution-limits.html

Dave

edit: for some reason that link won't work. But if you copy and paste the address into your browser, it works.

 

[coolhand]

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Go to the TSP web site, go to "what's new", then go to "current information".

Then read the 4th bullet.It looks to me like the IRS has raised the limit in 2005 to $42,000. This was the first I've seen of it.

It does say that it applies to section 415(c) and I don't know what that means. It may not apply to us. Anybody else know what section 415(c) is?

 

[Mike]

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I'd imagine the raw dollar cap on this must continue increasing by a set amount from 2006 on with the percentage cap eliminated.

As much as I'd like to, I can't afford to set aside $15k per year for the TSP... that'd be ridiculous. :shock:

 

[Rod]

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pyriel wrote:

Additionally, if an individual is constantly receiving a refund when he files his income tax, this only means that he is overpaying his taxes.

YOU HIT THE NAIL ON THE HEAD!!!:^

I recently changed my exemptions to 7, so I can wisely invest the rest while not being hit with a hefty tax bill.

As I once heard, "WHY ON EARTH WOULD YOU WANT TO GIVE UNCLE SAM AN INTEREST FREE LOAN!!!???":shock:

If you are receiving a HUGE tax refund check, then that's exactly what you are doing!!!

Let's wise up and take control of OUR $$$, instead of allowing Uncle Sam to control it.

God Bless:^

 

[Rod]

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mlk_man wrote:

puertorico wrote:

ok

I need an advise on ,what to do if only have a tsp account

or both," tsp and roth".I talk to a personal banker.And he

advice me to put just 6% in tsp, and open a roth account

with the other 8% .Becouse that 8% is

not getting match.



My opinion is, to still putting 14% on tsp becouse my retirement

day is far away,a least 18 years.But the banker said is better

you put in tsp the % they match "money free" and the other

porcent open and roth.

WHAT is u opinion ? I really dont know what to do !

options

1-stay 14% on tsp for now and when close to retirement open a roth ira

2- put 6% on tsp and the next 8% open an roth ira...

PR, you need to worry about contribution limits in your Roth also. This year it is $3000 max and next year is $4000 I believe. You can always open more than one Roth though.

I would personally put the 5-6% in your TSP and the rest in your Roth since there are more investment opportunities with your Roth.

Correct. Forget the banks... open a ROTH IRA no-load mutual fund.

 

[Guest]

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coolhand wrote:

Go to the TSP web site, go to "what's new", then go to "current information".

Then read the 4th bullet.It looks to me like the IRS has raised the limit in 2005 to $42,000. This was the first I've seen of it.

It does say that it applies to section 415(c) and I don't know what that means. It may not apply to us. Anybody else know what section 415(c) is?

415(c) Limit
The maximum amount that may be contributed for a participant to a defined contribution plan on an annual basis.

http://assembler.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000415----000-.html

http://www.irs.ustreas.gov/retirement/article/0,,id=96461,00.html

If others have not cleared up the issue, I believe that the limits imposed are set differently by one's employer and by the IRS. The higher am't is for those who have another pension plan and the combined limit as far as the IRS is concerned is $41K for 2004, $42K for 2005.

Caveat: All to the best of my knowledge.

 

[caspar]

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One other item i did not see mentioned in all of this TSP VS ROTH is what will be your tax bracket when you do retire. It is my belief that if you are to remain in the top tax range of this then you are better off with the Roth funded after any Tsp match>

 

[TheProphet]

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I am putting 14 % on TSP... The roth has other tax rules... I need all the capital to make it grow now... I will pay the taxes latter... and with the cash it will generate be suficient to pay tax now... will make it dificult the growth... I am also 50 and putting the $4000 catch up contribution into... max on TSP... can bit it... no commission on transaction yet... and tax deferred... and match up contribution... its great... its heavens... :^hope my social security would be the same... ocome on BUSH... help us and DO IT NOW !!!

 

[coolhand]

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Wonder Woman wrote:

415(c) Limit
The maximum amount that may be contributed for a participant to a defined contribution plan on an annual basis.

http://assembler.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000415----000-.html

http://www.irs.ustreas.gov/retirement/article/0,,id=96461,00.html

If others have not cleared up the issue, I believe that the limits imposed are set differently by one's employer and by the IRS. The higher am't is for those who have another pension plan and the combined limit as far as the IRS is concerned is $41K for 2004, $42K for 2005.

Caveat: All to the best of my knowledge.

Thanks WW. I wondered (no pun intended ) what that 42K was all about. I haven't had much time this week for research. This morning my internet connection was down as well. Good thing I didn't want to make a transfer.

I enjoy your posts. Maybe you could teach me how to dance?

 

[Guest]

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coolhand wrote:

I enjoy your posts. Maybe you could teach me how to dance?

 

[pyriel]

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caspar wrote:

One other item i did not see mentioned in all of this TSP VS ROTH is what will be your tax bracket when you do retire. It is my belief that if you are to remain in the top tax range of this then you are better off with the Roth funded after any Tsp match>

Hmmm... There are some truth to your analogy. However, some people are not able to maximize their contribution due to short of funding.Bymaxing the TSP now, it will then lower your tax bracket thus freeing up more moneyso you can contribute them to IRA. Let me give you an example. Let's say you are earning$50K per year. It is now 2006 (TSP becomes unlimited but IRS caps it with $15K). Also, for hte sake of argument lets say you are single.According to publication 17 (tax table) an individual who is single and earning $50K per year must pay a tax of $9316. but since you are smart and contributed $15K to your TSP, your tax bracket went down to $35K. This means that IRS only wants you to pay $5566. This is a difference of $3750. $3750 that you would have lost anyway if you didn't contribute to TSP. You can then take this #3750 and invest it somewhere else like the ROTH IRA.

I wouldn't worry too much about being in the top tax range by the time you retire. In fact if you are in the top tax range when you retire, this only means that you have a hefty retirement that will carry you until you die. This means that you will be able to live your life to the fullest and possibly still have something to leave to your kids. However, you will never get there if you do not max out the full potential and magic of compounding interest within your TSP or IRA.