Roth TSP vs Traditional TSP (TSP Explained)

Описание: Thrift Savings Plan explained. Should you chose the Roth TSP or Traditional TSP? Roth TSP is typically better for those who start investing early and often. Traditional TSP is better for those that are older or closer to retirement and have not invested at all.

This is because there is one deciding factor that makes Roth or Traditional better than the other: income tax. Roth means you pay taxes now and don't owe any taxes later. Traditional means you defer paying taxes now and pay them when you withdraw from your TSP. You're going to take a tax hit now or later... so will your income tax bracket be lower now or later? If you think you're going to retire "better off" and generate more income in retirement then you do now, then do Roth TSP. If you only plan on collecting social security and maybe a small pension, therefore, you're retirement income will be less than it is now, do Traditional TSP. As a loose rule of thumb I would say if you are within 15 years of retirement or only plan on investing 5% or less of your salary then do traditional. For everyone else Roth is probably a better option.

There are a few additional bonuses for doing the Roth TSP. The biggest advantage is when you leave federal employment you can transfer your Roth TSP to a Roth IRA. A Roth IRA has the most benefits out of any retirement account. Inside a Roth IRA there are no Required Minimum Distributions (RMDs). Another benefit is when you pass away whoever inherits the Roth IRA won't have to worry about paying any taxes. Last benefit is you take out the risk that income tax rates could possibly get higher years from now when you go to retire. The United States is in 28 trillion dollars of debt and counting. Tax rates may go up.

Q&A
-You can still get the government match whether you do Roth or Traditional. The government match has to go into Traditional. But you can do all Roth with your entire contribution.
-The max you can contribute is $19,500 (can be a mix of Roth and Traditional) and that doesn't include the government match.
-You will NOT get the match if you did not opt into the BRS. But you can still contribute to the TSP.

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00:00 Intro
00:38 Roth vs Traditional
02:22 The Numbers Breakdown
04:58 Bonuses for Roth TSP
06:30 Q&A