ROTH TSP now available in my agency

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Topic Author
burnsh
Posts: 145
Joined: Sat Jan 10, 2009 2:09 pm
Location: San Antonio, TX

ROTH TSP now available in my agency

Post by burnsh »

YEAh!

I check my agency finance webpage this morning, and I can finally sign up for the ROTH TSP effective Pay Period 10. :D
Burnsh | ______________________________________ | VFIAX 17%, VVIAX 17%, VEXAX 16%, VTIAX 21%, VGSIX 9%, VIPSX 10%, VBMFX 10%
User avatar
Taylor Larimore
Posts: 32842
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Traditional vs. Roth IRAs

Post by Taylor Larimore »

Hi Burnish:

Be careful what you wish for. A Roth IRA is not the best IRA for everyone.

The general rule is that if you expect your income tax bracket to be the same or higher (than it is now) when you withdraw the money, the Roth is probably the better choice. If you expect your income tax bracket to be lower when you withdraw, it is probably better to enjoy the current tax-deduction of a Traditional IRA.

Below are two links you should find helpful:

https://personal.vanguard.com/us/whatwe ... a/whichira

Morningstar IRA Calculator

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
User avatar
Topic Author
burnsh
Posts: 145
Joined: Sat Jan 10, 2009 2:09 pm
Location: San Antonio, TX

Re: ROTH TSP now available in my agency

Post by burnsh »

My effective tax rate has hovered around 2% for years. I definetely think my tax rate will be higher when they force me to retire in 16 years. I also personally believe we will be affected by higher tax rates in the future due to the growing national debt. I rather pay the taxes now than later.
Burnsh | ______________________________________ | VFIAX 17%, VVIAX 17%, VEXAX 16%, VTIAX 21%, VGSIX 9%, VIPSX 10%, VBMFX 10%
User avatar
grabiner
Advisory Board
Posts: 35307
Joined: Tue Feb 20, 2007 10:58 pm
Location: Columbia, MD

Re: ROTH TSP now available in my agency

Post by grabiner »

burnsh wrote:My effective tax rate has hovered around 2% for years. I definetely think my tax rate will be higher when they force me to retire in 16 years.
You should check your marginal tax rate, not your effective (average) tax rate. It's probably 15%, though, and with your pension and traditional TSP withdrawals, you'll retire in a 15% bracket even under current law (and if you are FERS, more likely 22.5% or 27.75% over most of your retirement because of the phase-in of Social Security taxation).

If you are in this situation, you may want to split your contributions between the Roth and traditional TSP to avoid going into the 25% bracket.
Wiki David Grabiner
Post Reply