TSP to ROTH TSP

[Intrepid_Timer]

Seven,

I read in your thread that you are contributing to both traditional and Roth TSP. How were you able to sign up? I looked all through tsp.gov and didn't see a way. I'm guessing for me I'll have to go through EBIS. I can't access it from home, so will have to wait to get back to work on Monday to find out.

From what I understand, if you sign up for the Roth option, your own contributions go into the Roth and the government's matching automatically goes into your regular account. Also, when you do an IFT in one account, the other gets moved automatically also.

 

[seven]

Seven,

I read in your thread that you are contributing to both traditional and Roth TSP. How were you able to sign up? I looked all through tsp.gov and didn't see a way. I'm guessing for me I'll have to go through EBIS. I can't access it from home, so will have to wait to get back to work on Monday to find out.

You don't do it through TSP.gov, but whatever payroll system your dept. uses. We use Employee Express so that is where I set my contribution amounts to each of the Roth & Traditional TSP. You only go to TSP.gov if you want to change what funds your contributions go to. It doesn't seem to be possible to have separate funding instructions for Traditional & Roth. Whatever you set on TSP.gov seems to get applied to both.

 

[pmcint01]

Does anyone have any advice on how to determine if the ROTH TSP is right for me? It is available at my agency now. I've searched on line and all I can find is about being in a higher tax bracket later in life. I have no idea if that will be the case.

Thanks

 

[ILoveTDs]

Does anyone have any advice on how to determine if the ROTH TSP is right for me? It is available at my agency now. I've searched on line and all I can find is about being in a higher tax bracket later in life. I have no idea if that will be the case.

Thanks

If your a young pup with kids at home, that should be the case (higher tax bracket). Even if you salary stays the same, you won't have the child tax credit forever, eventual you'll pay off the mortgage (hopefully) that just about kills most people itemized deduction, these just to name a few and more will lead to more income being taxed. So even if by chance you don't go into a higher tax bracket your effective tax rate will be higher.

 

[ILoveTDs]

If your a young pup with kids at home, that should be the case (higher tax bracket). Even if you salary stays the same, you won't have the child tax credit forever, eventual you'll pay off the mortgage (hopefully) that just about kills most people itemized deduction, these just to name a few and more will lead to more income being taxed. So even if by chance you don't go into a higher tax bracket your effective tax rate will be higher.

Weather to go Roth TSP is a personal choice and I have not fully looked into, so I'm not endorsing it one way or another. I'm just say I would assume you will be in a higher effective tax rate down the road if you are in the think of it with family right now. If that helps you with your choice.

 

[Viva_La_Migra]

Does anyone have any advice on how to determine if the ROTH TSP is right for me? It is available at my agency now. I've searched on line and all I can find is about being in a higher tax bracket later in life. I have no idea if that will be the case.

Thanks

I signed up for the ROTH option, because I want at least one source of income that will be untaxed when I retire. I don't really care what my tax rate will be in the future. If you can do both a ROTH IRA and the ROTH TSP option, I say go for it.

 

[wvango]

From what I am hearing, the Marine Corps they can go and set up TSP roth through their Admin Office 1 June. This is due to MyPay not being ready yet, but should be around Julyish. Governemnt Employees EBIS i am hearing around July as well.

 

[domingo3]

Does anyone have any advice on how to determine if the ROTH TSP is right for me? It is available at my agency now. I've searched on line and all I can find is about being in a higher tax bracket later in life. I have no idea if that will be the case.

Thanks

You can play around with a calculator like this one (Traditional vs. Roth 401(k) Calculator), but it still comes down to what your tax brackets are going to be. The truth is, none of us know what our future tax rates will be, so we're all in the same boat.
I would say that if you're in the 15% tax bracket, it's almost a sure thing to choose the Roth TSP. If you're in 25% or higher, you may want to put some more thought into it.
Regardless, there's a concept called "tax diversification" where you choose some of each because you don't know what the future will bring. If you think you'll be getting a pension, then you already know that you'll have some taxable income. It would be good to have some money in a tax-free vehicle, so you have some more options when the time comes to withdraw.
The general consensus is that tax rates will be going up. They're pretty low right now. Of course, radical changes to tax could happen (like a consumption tax) which would take away advantages of Roth, but most scenarious would point to it being good, or at least break-even to put some money into a Roth.

 

[malyla]

I'm I right in thinking that I will get the government matching (5%) in my traditional TSP account even if I have all my contributions going to the ROTH TSP account?

 

[pmcint01]

I'm 36 years old with 2 kids 3 and 6 years old. I have at least 21 years until retirement. Currently in the 25% tax bracket. I own 1 rental property that gives me a lot of deductions. I usually get a good sized tax refund each year although this year was a lot less because my I actually turned a profit on the rental property. According to that calculator it says I will make out better with a Roth. Just have decide if I can live with less take home pay since we may not get another raise for 5 years at the rate we are going.

 

[domingo3]

Yes

I'm I right in thinking that I will get the government matching (5%) in my traditional TSP account even if I have all my contributions going to the ROTH TSP account?

 

[MrBowl]

I got an email last week stating that the Roth is now available to DOI folks. Unfortunately, the login rules for Employee Express changed and I'm locked out until I can call them!

Anyway, I've always heard that the order of priority is 1) Do what it takes to get the full matching from your company - in our case that's 5% in the traditional pre-tax TSP. 2) Maximize your Roth contribution. 3) Batck to traditional IRAs or TSP or any other investment vehicle.

Is that still good advice?

 

[Bullitt]

@MrBowl: Yes. It's still good advice.

I plugged in the numbers to the Schwab calculator and it says I'll make 33% more with a Roth 401K but will have to do so with 5% less take home pay. That 5% would severely limit contributions to the Roth IRA and any other potential after-tax investment vehicles (529, savings, etc). Roth 401K is certainly a good choice to consider if your only tax break is the 401K. I'm thinking down the road I will contribute, but for now I'm sticking with the tax break up front. (Actually our contri's, along with other items, lowered our tax rate on 2011's taxes.)

 

[Boghie]

Concur with Bullitt. Good to see him again!!!

Anyway, for me, I still have space to discount my contributions by 33% (Fed @ 25%, My Full Retard State of Kalefornea @ 8%) by investing in the traditional TSP account. That means, it will cost me $67 take home to invest $100 in my TSP account.

That, to me, looks to be a better deal. The investment advice seems to put the fulcrum at the Federal marginal tax rate of 25%. Seems to work...

 

[domingo3]

I got an email last week stating that the Roth is now available to DOI folks. Unfortunately, the login rules for Employee Express changed and I'm locked out until I can call them!

Anyway, I've always heard that the order of priority is 1) Do what it takes to get the full matching from your company - in our case that's 5% in the traditional pre-tax TSP. 2) Maximize your Roth contribution. 3) Batck to traditional IRAs or TSP or any other investment vehicle.

Is that still good advice?

This is still good advice, but you can accomplish #1 by contributing %5 to Traditional or Roth TSP. For #2, you're missing the important distinction that the advice was specifically for Roth IRA.

To clarify:

1) Do what it takes to get the full matching from your company - in our case that's 5% in the traditional or Roth TSP. 2) Maximize your Roth IRA contribution. 3) Back to traditional IRAs or TSP or Roth TSP any other investment vehicle.

The water is murkier now because where before your hand was forced to do some tax deferred investing if you had a match offered, now you don't have to do any tax deferred. You have to make decisions based on current and unknown future tax circumstances.

 

[Frixxxx]

Concur with Bullitt. Good to see him again!!!

Yes, Great to see you Bullitt!

 

[Skooby]

We all know that it would beneficial to get a ROTH (IRA or TSP) if you think you'll be in a higher tax bracket when you retire. My question is...is that referring to pre or post retirement?

I'm currently in the 25% bracket (35, single, no kids, GS-9). I do expect to be in the 28% bracket when I retire.

 

[nnuut]

We all know that it would beneficial to get a ROTH (IRA or TSP) if you think you'll be in a higher tax bracket when you retire. My question is...is that referring to pre or post retirement?

I'm currently in the 25% bracket (35, single, no kids, GS-9). I do expect to be in the 28% bracket when I retire.

Just get married and buy a house then you'll be fine!

 

[rcknfrewld]

Wouldn't it be better to pay taxes later than now...the whole compounding thing

 

[travelingman]

We all know that it would beneficial to get a ROTH (IRA or TSP) if you think you'll be in a higher tax bracket when you retire. My question is...is that referring to pre or post retirement?

I'm currently in the 25% bracket (35, single, no kids, GS-9). I do expect to be in the 28% bracket when I retire.

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Just remember,only part of your annual salary is in the 25% bracket. Some of it is in the 10% bracket and some of it is in the 15% bracket as well. How could TAXES not be higher in 5, 10, 20, 30 years.. The U.S debt has to be paid some how..History has shown ( under Pres Carter) that TAXES were once 100% higher (double) at one time... Food for thought...

Federal Income Tax Brackets for 2012Here’s a quick rundown of what the Federal income tax brackets are expected to look like in 2012:

Tax Bracket	Married Filing Jointly	Single
10% Bracket	$0 – $17,400	$0 – $8,700
15% Bracket	$17,400 – $70,700	$8,700 – $35,350
25% Bracket	$70,700 – $142,700	$35,350 – $85,650
28% Bracket	$142,700 – $217,450	$85,650 – $178,650
33% Bracket	$217,450 – $388,350	$178,650 – $388,350
35% Bracket	Over $388,350	Over $388,350