Something to consider if you have college age kids filling the FAFS is using the traditional TSP will lower your adjusted gross income for aid. Plan 2 years before your kids start college and switch to TSP traditional if you. Can get yourself into the lower AGI you may qualify for more financial aid.
Just to clarify, if I did 5% in a roth the agency will still match 5% but the matching will go into a traditional TSP. Or are you saying that the agency only matches up to 5% of contributions that the employee puts in a traditional?
Because we’re a single income family, when I was working, we were in the 22% tax bracket. In retirement, due to other non-retirement fund savings/investments, my pension is our only earned income taxable money, so were solidly in the 12% bracket. This makes me wish I didn’t use the Roth TSP when I was working! I should have saved on the taxes when I was working.
Crazy story. I was active duty from 2006-2014. My father who was also active duty made me invest $100 a month. I believe the Roth came in 08-09 ish. I got out in 2014 and forgot all about that account. Joined civil service in 2020, had to call and wait for 45 minutes to verify my identity and get them to mail me my code to log in. When I saw that my military account never stopped growing I couldn’t believe it. I’ve been doing 10% -100% C fund and don’t plan on stopping for 20-25 more years.
What if you did both but then stop and started putting your money only in the traditional do the money that was in the Roth goes in to your traditional ?
You need to make it clear to your audience that Special Category Employees cannot access their Roth TSP until 59.5 even if they retire with 25 years of service. If someone entered on duty in their early 20s, they should consider Traditional vs. Roth TSP. Especially if they plan to retire before 57 and plan to withdraw from their TSP.
Thing is, it feels like it’d be easier to do Roth once you’re north of six figures. With the cost of everything going up and up, the value of take home dollars on payday feels greater because you have make ends meet. Especially if it’s one income.
But your APPLICABLE tax rate may be lower in retirement. When we retire, will my earned income be equal to my working years? Maybe / maybe not. probably not. Strong possibility many will be in a lower tax bracket. Always crunch the numbers...
Do Roth since taxes are only going to go *up* over the next decade or two as the US continues to rack up an unbelievable debt and they are going to have to find a way to pay for it... likely on the backs of tax payers. Plus, when you are working and making a good income, you can usually afford the taxes, but when you are retired and on a fixed income, you need every penny. But in the end, I decided to invest in a David Lee Roth where I send money to an aging rock star and live vicariously through his hijinks.
Maryland's Retirement Tax Elimination Act (RTEA) eliminated state income taxes on retirement income (TSP) for individuals who are 65 years of age or older. How does this affect ROTH conversion!?!?
That's a great question! If you would like me to make more content and videos on this topic, you can submit your question here: app.hawsfederaladvisors.com/question-submission
Wish I had the Roth Option my entire career, came late for me! Ever consider a session on Portfolio allocations? Example in the TSP what is a 60/40 Portfolio? Would the Bonds be all G or all F (seems bad now) or a mix of G & F or is there no viable 60/40 portfolio in TSP???? What is a good Growth allocation, etc.?
I saved the max I could in traditional TSP. After retirement, took a partial, lump sum to pay for property. Took enough to pay the taxes. So I thought. Also, Medicare is based on income 2 years prior….yup, that lump sum counts. So, in hindsight, I should have invested in Roth TSP once available because happily, our after retirement income bracket is not lower. The Roth would have been a better choice for us.
I started paying 60/40 split on trad TSP and (over50) payed catch max to R/TSP with the same split. Then 2 years ago I put everything trad match same split and the catch up all into Roth TSP on future contributions
What if you did both but then stop and started putting your money only in the traditional do the money that was in the Roth goes in to your traditional ?
I've been compounding in growth investments in my TSP Roth and Roth IRA for over 24 years and love my future. The gains in my individual stocks in my Roth IRA show me why I'm using the Roth, tax free astronomical gains!
@@tonyfunny7208 Contribute as much as your income and budget allows with goal to max contribute $23k to TSP. As default $7,000 to Roth IRA and as much as you can to traditional TSP.
Pay the taxes now because they will be higher later. Also here's a theory. Money you put in a traditional TSP account reduces your annual adjusted gross income, and that in turn reduces the high 30 average upon which your social security amount is based. It's not much different for just one year, but toward the end of your career over several years, it can probably make a difference. I haven't done the math on this yet, but it makes sense, right?
1:40 Technically no tax deduction as there is no line on Tax Form 1040 to claim deduction, but rather a tax *_reduction_* for traditional TSP contribution.
Same here. I am working in California now and going back to Florida to retire. I had Roth TSP for a couple of years, then went back to traditional when I realized California is taxing me more with Roth TSP. So, I have been losing money since I planned to retire in Florida with no state tax.
@@happilife2222 But all your earnings from the Roth TSP are tax free, and you will be taxed on earnings from the traditional TSP no matter what state you're in. So in the end, you'll pay a lot more tax when you withdraw from the traditional than the extra tax you paid on contributions to the Roth. And you'll pay those taxes during retirement. Ouch!
But when you do make a withdraw from Roth in retirement that money more then likely will put you in a higher tax bracket so you will pay tax on it correct?
Great question! Any money you put into the Roth TSP is pre-taxed. This means that any money you take out is tax-free and it will not affect your tax bracket. Your tax bracket will be determined by other factors at that point. But, this is all assuming you follow all the rules for a Roth TSP. If you would like more information about the TSP or tax brackets, here are the links: hawsfederaladvisors.com/tsp-investing-articles/ hawsfederaladvisors.com/tax-articles/
With the traditional TSP, you get to make interest and dividends for many years (because it is not taxed), but with the Roth TSP you you lose the potential for dividends and interest because the $10K was already taxed and not available to make earnings. Hence the traditional TSP is better and has a higher overall rate of return.
"invest tax savings" That's a common misconception and completely faulty notion. Contributing to traditional TSP does not result in "tax savings" with which you can invest in Roth IRA or any other place since those tax savings are already inside and part of the traditional TSP contribution.
@@alrocky You are full of Horse Hockey. If I contribute to a traditional IRA/TSP then my tax basis is lowered and do NOT pay tax on whatever I contributed. THEN I can take what I would have paid in taxes (on the Trad IRA/TSP) and invest it into a ROTH ira. Yes, you pay taxes when you take the money out of the Trad IRA/TSP, but you will have been earning money on the ROTH!
@@kenedward4585 Here's your Horse Hockey math with hypothetical 20% tax: $10,000 pretax income = ($10,000 * 0.80 =) $8,000 spendable income + $2,000 tax $10,000 pretax income = ($10,000 * 0.80 =) $8,000 Roth 401(k) + $2,000 tax $10,000 pretax income = $10,000 traditional 401(k) + $0.00 tax $10,000 pretax income = $8,000 t-401(k) + $2,000 t-401(k) + $0.00 tax Any horse jockey can see that the $2,000 tax is either paid to Uncle Sam or deferred inside and part of the $10,000 traditional 401(k) contribution.
I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Karen Cosmann
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.
For middle income people, that's smart. Many planners recommend having investments in all 3 buckets (Taxable, Traditional, Roth) to give you flexibility
@ *Joe* favor contributing traditional TSP when in relatively high ta bracket and favor contributing Roth TSP when in relatively low tax bracket. Under $47k is 12% Federal Tax Bracket so favor Roth TSP.
@@JOESCHOOLSHOW At 35% federal tax bracket you have plenty of options and should max out TSP at $23,000 every year. Default option is $23,000 to traditional TSP plus $7,000 Roth IRA - both every year. If your budget allows that you can easily afford that $30k and you want to contribute more then you can go all Roth TSP and Roth IRA and then open taxable brokerage account. Contribute to HSA/FSA.
Hi! I stated working for the gov two years ago, transferred my 401k balance to TSP, I do contribute to Roth however I haven’t quite figured out how to check how much the ROTH acct has grown. I can see how much I have put in, but not how much it growing? Can anyone guide me??
It's a little confusing, but in there. When logged in, if you go to the Contribution tab, you have to compare you Nontaxable Balance (how much you paid in Roth) to the Roth value in the box above it under Contribution Balances (current value of your Roth).
Actually because tax bracket 32% is so high and next level is 24% we are talking about 8%, Huge spread use typical to drop it until 24%. I still have a problem with that kind of income hiding money when you pull it out later.
Please explain to your audience that a (traditional IRA) deduction is not automatic, example/when married filing jointly or qualifying widow(er) and your AGI is over $136,000 or more there are no deduction(s)!
Something to consider if you have college age kids filling the FAFS is using the traditional TSP will lower your adjusted gross income for aid. Plan 2 years before your kids start college and switch to TSP traditional if you. Can get yourself into the lower AGI you may qualify for more financial aid.
Roth is my win/win, don't get taxed on withdrawals because you had already paid it up front. Taxed enough already!!
Keep in mind the agency match only goes to TSP traditional
Thank you for sharing
Just to clarify, if I did 5% in a roth the agency will still match 5% but the matching will go into a traditional TSP. Or are you saying that the agency only matches up to 5% of contributions that the employee puts in a traditional?
@@TheDayglowcamo 5% gov match goes toward your traditional TSP balance regardless of whether you contribute 5% to Roth TSP or 5% to traditional TSP.
Because we’re a single income family, when I was working, we were in the 22% tax bracket. In retirement, due to other non-retirement fund savings/investments, my pension is our only earned income taxable money, so were solidly in the 12% bracket. This makes me wish I didn’t use the Roth TSP when I was working! I should have saved on the taxes when I was working.
But let’s say you have 1 million in your Roth IRA. All of that is yours! The gov can touch!
@@yourmanzach2307😂
Crazy story. I was active duty from 2006-2014. My father who was also active duty made me invest $100 a month. I believe the Roth came in 08-09 ish. I got out in 2014 and forgot all about that account. Joined civil service in 2020, had to call and wait for 45 minutes to verify my identity and get them to mail me my code to log in. When I saw that my military account never stopped growing I couldn’t believe it. I’ve been doing 10% -100% C fund and don’t plan on stopping for 20-25 more years.
Balance on the account?
Roth started 2012
@@David-cv3bp not for the military. TSP Enhancement Act.
So is that good or bad?
As suggested do both the benefits of TSP Roth is no RMD. However, traditional TSP RMD is required.
When in doubt do both, you don't have to pick one or the other....
What if you did both but then stop and started putting your money only in the traditional do the money that was in the Roth goes in to your traditional ?
I started Roth conversions after Fed retirement. It was not an option, just a few years ago. Do a ROTH in the TSP up to the max. You will not be sorry
For sure when the tax system gets fixed to address the deficit
You need to make it clear to your audience that Special Category Employees cannot access their Roth TSP until 59.5 even if they retire with 25 years of service. If someone entered on duty in their early 20s, they should consider Traditional vs. Roth TSP. Especially if they plan to retire before 57 and plan to withdraw from their TSP.
Wish I knew this earlier in my fed career but ah-well! I have about 13 years left (I hope), so should still benefit from Roth TSP.
My one TSP regret is not investing in Roth from Day 1.
When I started they didn't have this at this time
I do both for some reason . 5 percent each .
Thing is, it feels like it’d be easier to do Roth once you’re north of six figures. With the cost of everything going up and up, the value of take home dollars on payday feels greater because you have make ends meet. Especially if it’s one income.
Perfect, many thanks! You exactly answered my question about this.
Taxes will not go lower.
What I always say too.
But your APPLICABLE tax rate may be lower in retirement. When we retire, will my earned income be equal to my working years? Maybe / maybe not. probably not. Strong possibility many will be in a lower tax bracket. Always crunch the numbers...
@@Ethan-ls4cltrue unless you are mid to lower middle class,
Do Roth since taxes are only going to go *up* over the next decade or two as the US continues to rack up an unbelievable debt and they are going to have to find a way to pay for it... likely on the backs of tax payers. Plus, when you are working and making a good income, you can usually afford the taxes, but when you are retired and on a fixed income, you need every penny. But in the end, I decided to invest in a David Lee Roth where I send money to an aging rock star and live vicariously through his hijinks.
Haha, thank you for sharing!
Maryland's Retirement Tax Elimination Act (RTEA) eliminated state income taxes on retirement income (TSP) for individuals who are 65 years of age or older. How does this affect ROTH conversion!?!?
That's a great question! If you would like me to make more content and videos on this topic, you can submit your question here:
app.hawsfederaladvisors.com/question-submission
There is another issue for utilizing the regular TSP. You can contribute more due to the tax break.
Wish I had the Roth Option my entire career, came late for me! Ever consider a session on Portfolio allocations? Example in the TSP what is a 60/40 Portfolio? Would the Bonds be all G or all F (seems bad now) or a mix of G & F or is there no viable 60/40 portfolio in TSP???? What is a good Growth allocation, etc.?
Another thought is what does a portflio look like with 75% of the projected Social Security and a FERS Pension with no COLA. Both real possibilities.
Spot on advice.
I saved the max I could in traditional TSP. After retirement, took a partial, lump sum to pay for property. Took enough to pay the taxes. So I thought. Also, Medicare is based on income 2 years prior….yup, that lump sum counts. So, in hindsight, I should have invested in Roth TSP once available because happily, our after retirement income bracket is not lower. The Roth would have been a better choice for us.
I started paying 60/40 split on trad TSP and (over50) payed catch max to R/TSP with the same split. Then 2 years ago I put everything trad match same split and the catch up all into Roth TSP on future contributions
I am 66
You can do a mix too…it’s not one or the other
What if you did both but then stop and started putting your money only in the traditional do the money that was in the Roth goes in to your traditional ?
Great question. No, the money that was in the Roth stays in the Roth.
Roth always makes senae unless taxes will go lower…period
I am putting in Roth so I can take out a big chunk to pay mortgage.
I've been compounding in growth investments in my TSP Roth and Roth IRA for over 24 years and love my future. The gains in my individual stocks in my Roth IRA show me why I'm using the Roth, tax free astronomical gains!
Yea must have a Private Roth IRA? Tsp Roth only been available @ 12yrs
@David-cv3bp Yep, I have a Private Roth IRA and a Self-directed Roth IRA for other assets. It is a winning combination.
How about 50/50? Put some in both. I’m 45 and I was giving 10% to traditional. I recently changed it to 5% traditional and 5% Roth.
I hope that plan works great for you! I wish you the best of luck planning your retirement!
@@PlanYourFederalBenefits is that a bad idea?
@@tonyfunny7208 Contribute as much as your income and budget allows with goal to max contribute $23k to TSP. As default $7,000 to Roth IRA and as much as you can to traditional TSP.
The Roth is best IMHO for the over 50 additional deposit-also Max your donation
Can special provisions/sce employees access Roth tsp before 59.5? We keep getting mixed answers on this
Not currently, traditional you can before 59.5. Law passed just a few years ago allows that.
Are government matching contributions into Roth TSP pre-tax or post-tax? I know employee contributions are post-tax.
I believe it's Pre-tax.
Government contributions never go to the Roth. They go to the traditional TSP. Therefore they are pretax contributions.
I never had a choice. They just started putting money into the Roth
Pay the taxes now because they will be higher later. Also here's a theory. Money you put in a traditional TSP account reduces your annual adjusted gross income, and that in turn reduces the high 30 average upon which your social security amount is based. It's not much different for just one year, but toward the end of your career over several years, it can probably make a difference. I haven't done the math on this yet, but it makes sense, right?
OASDI tax is withheld regardless of traditional or Roth TSP contributions.
A person's SSA tax - is not effected
TSP shows your non-taxable balance.
What’s going to suck big is when those yahoos in Washington figure out a way to tax the earnings on a Roth. Wouldn’t put it past them.
Waaaaaaa.
They will take 25% of your projected Social Security before they ever did that.
Tax deductible and tax deferred are not the same thing
1:40 Technically no tax deduction as there is no line on Tax Form 1040 to claim deduction, but rather a tax *_reduction_* for traditional TSP contribution.
What is the best way to go if you work in an income tax state like MA. and will retire in a Tax free state of NH?
Same here. I am working in California now and going back to Florida to retire. I had Roth TSP for a couple of years, then went back to traditional when I realized California is taxing me more with Roth TSP. So, I have been losing money since I planned to retire in Florida with no state tax.
@@happilife2222 But all your earnings from the Roth TSP are tax free, and you will be taxed on earnings from the traditional TSP no matter what state you're in. So in the end, you'll pay a lot more tax when you withdraw from the traditional than the extra tax you paid on contributions to the Roth. And you'll pay those taxes during retirement. Ouch!
But when you do make a withdraw from Roth in retirement that money more then likely will put you in a higher tax bracket so you will pay tax on it correct?
Great question! Any money you put into the Roth TSP is pre-taxed. This means that any money you take out is tax-free and it will not affect your tax bracket. Your tax bracket will be determined by other factors at that point. But, this is all assuming you follow all the rules for a Roth TSP. If you would like more information about the TSP or tax brackets, here are the links:
hawsfederaladvisors.com/tsp-investing-articles/
hawsfederaladvisors.com/tax-articles/
IRS--- IRMAA will hurt you. $$$$$$
With the traditional TSP, you get to make interest and dividends for many years (because it is not taxed), but with the Roth TSP you you lose the potential for dividends and interest because the $10K was already taxed and not available to make earnings. Hence the traditional TSP is better and has a higher overall rate of return.
Trad TSP IRA makes sense only if you need the tax break to stay out of debt, or are going to invest the tax savings in an external ROTH IRA.
"invest tax savings" That's a common misconception and completely faulty notion. Contributing to traditional TSP does not result in "tax savings" with which you can invest in Roth IRA or any other place since those tax savings are already inside and part of the traditional TSP contribution.
@@alrocky You are full of Horse Hockey. If I contribute to a traditional IRA/TSP then my tax basis is lowered and do NOT pay tax on whatever I contributed. THEN I can take what I would have paid in taxes (on the Trad IRA/TSP) and invest it into a ROTH ira. Yes, you pay taxes when you take the money out of the Trad IRA/TSP, but you will have been earning money on the ROTH!
@@kenedward4585 Here's your Horse Hockey math with hypothetical 20% tax:
$10,000 pretax income = ($10,000 * 0.80 =) $8,000 spendable income + $2,000 tax
$10,000 pretax income = ($10,000 * 0.80 =) $8,000 Roth 401(k) + $2,000 tax
$10,000 pretax income = $10,000 traditional 401(k) + $0.00 tax
$10,000 pretax income = $8,000 t-401(k) + $2,000 t-401(k) + $0.00 tax
Any horse jockey can see that the $2,000 tax is either paid to Uncle Sam or deferred inside and part of the $10,000 traditional 401(k) contribution.
Could you repeat that 🤣
I lost over $80k when everything started to tank. Not because I was in an exchange that went belly up. I was just stupid to hold and because that's what everyone said. I'm still responsible. It just taught me to be a better investor now that I understand more of what could go wrong. It took me over two years of being in the market, I'm really grateful I found one source to recover my money, at least $10k profits weekly. Thanks Karen Cosmann
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a financial professional but is very advisable you make use of a professional.
How about 50-50
That’s what I’ve been doing
Doesn’t have to be all or nothing
For middle income people, that's smart. Many planners recommend having investments in all 3 buckets (Taxable, Traditional, Roth) to give you flexibility
@ *Joe* favor contributing traditional TSP when in relatively high ta bracket and favor contributing Roth TSP when in relatively low tax bracket. Under $47k is 12% Federal Tax Bracket so favor Roth TSP.
@@alrocky I am in the 35% bracket now
@@JOESCHOOLSHOW At 35% federal tax bracket you have plenty of options and should max out TSP at $23,000 every year. Default option is $23,000 to traditional TSP plus $7,000 Roth IRA - both every year. If your budget allows that you can easily afford that $30k and you want to contribute more then you can go all Roth TSP and Roth IRA and then open taxable brokerage account. Contribute to HSA/FSA.
Hi! I stated working for the gov two years ago, transferred my 401k balance to TSP, I do contribute to Roth however I haven’t quite figured out how to check how much the ROTH acct has grown. I can see how much I have put in, but not how much it growing? Can anyone guide me??
It's a little confusing, but in there. When logged in, if you go to the Contribution tab, you have to compare you Nontaxable Balance (how much you paid in Roth) to the Roth value in the box above it under Contribution Balances (current value of your Roth).
Unless your making 400k and your effective rate is above 30 percent you should do the Roth
Yes. 32% marginal tax rate or higher --> Traditional TSP; 24% marginal rate or lower --> Roth TSP.
I actually read that really rich people rather do the roth, knowing they are sheltered for life.
Actually because tax bracket 32% is so high and next level is 24% we are talking about 8%, Huge spread use typical to drop it until 24%. I still have a problem with that kind of income hiding money when you pull it out later.
@@DesignBuildFixReview effective tax rate so there is not a gap
Please explain to your audience that a (traditional IRA) deduction is not automatic, example/when married filing jointly or qualifying widow(er) and your AGI is over $136,000 or more there are no deduction(s)!
Not sure what you are saying
Roth is always the way!
Take a seat Uriel