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Thread: Roth IRA vs. Roth TSP

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    #1

    Roth IRA vs. Roth TSP

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    So, DH and I are trying to follow Dave Ramseys baby steps and I believe we are getting close to the time to do investments!

    DH does TSP already and we want to do an IRA as well. I am trying to figure out the difference between doing a Roth IRA through USAA vs doing the Roth TSP. I think the only difference is that with the IRA, we have to pick all of our investments (without guidance), whereas the Roth TSP is sort of guided and they have allocations that you pick from? Does anyone know the difference? I understand that we can do both, but right now without me working, I think we can only do one. Thanks!
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    Me too! If I understand correctly they are pretty much the same thing, just the government calls it something fancy smanchy. USAA's is pretty easy and they have financial adviser people to help guide you and explain if you want to call up. Since I wasn't dropping in a lump sum of $3000 to start with I just went with their standard starter growth that averages 6% I think and then will bump it up once I have enough in the account. Oh an because you are married you can have two. If you were single and unemployed you couldn't, but married you can still contribute to your own IRA.
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    So, I called USAA and talked to one of their financial advisors. He told me that a roth ira and roth tsp serve the same function, except the ira is totally individual - not connected to employment and there are endless options for investments (CDs, annuities, mutual funds, stocks, bonds, etc -anything under the sun). He said the roth tsp only has 10 investing options - BUT - he also said that he recommends taking advantage of the roth tsp since it's so easy to use and you can set up an allotment so you never see the money and therefore don't "miss" it. Also, you can have both types of accounts.
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    Yeah, I get the whole don't miss it aspect. But I thought only a service member could use the tsp and a civilian spouse had to use a roth .
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    #5
    is there a maximum contribution on the tsp? if you have both, is the max on the roth (5000) the max for each?

    I never heard of the roth tsp!
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    Quote Originally Posted by Guynavywife View Post
    is there a maximum contribution on the tsp? if you have both, is the max on the roth (5000) the max for each?

    I never heard of the roth tsp!
    Roth TSP is new and finding solid info on it is damn hard. The rumor mill says that contributions to ROTH TSP in no way affect you limits for a regular Roth, so you could put money in Roth TSP and then still do your 5k into a Roth IRA. But I can't seem to find confirmation of that.
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    Here's a link to an Q&A I wrote comparing the Roth TSP to the Roth IRA. I'll address the questions above:
    1) Contributions to the Roth TSP do not affect your ability to contribute to a Roth IRA--if you're eligible for a Roth IRA (meet income limits--$173K married filing jointly), you can contribute the full $5,000 no matter how much you put into the Roth TSP.
    2)Roth TSP is an employer retirement plan. Therefore, it is only available for the servicemember...not the spouse.
    3)Max contribution to the Roth TSP for someone under 50 is $17,000 ($17,500 next year).

    Key differences between Roth IRA and Roth TSP
    1) contribution limit--$5,000 for IRA and $17,000 for TSP
    2) access--Roth IRA allows you to withdraw your contributions at anytime without taxes or penalties at anytime, Roth TSP does not
    3)investment options--Roth IRA is virtually anything you can think of, Roth TSP is limited to the G,F,C,S, and I funds or the Lifecycle funds that mix those investments for you
    4)Required Minimum Distributions--this doesn't happen until age 70 1/2, but if you still have money in the Roth TSP at that time the IRS makes you begin to withdraw--the Roth IRA doesn't have this rule (so, you could just rollover your Roth TSP to a Roth IRA when you separate/retire)

    If you just had to pick one, I'd start the Roth TSP. The fact that it's so easy to visit myPay and increase your contribution every time you get a pay raise or promotion tips the scale IMO. Whether you use the Roth TSP or Roth IRA the chance to build a chunk of money that is available tax-free in retirement is exciting (at least to a financial planner).
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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    #8
    Great info, thanks!

    Here's a dumb question. On Mypay, where it lists the Roth TSP - it just has a blank with a $_______ versus the % like regular TSP. If I put in a dollar amount for the Roth, is that per month or per pay check? I am assuming per month just like the tsp is per month?
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    JJ, can you confirm that Roth TSP money has essentially the same tax status as Roth IRA money? IOW, both are post-tax investments and that withdraws are then tax-free?
    Science always wins over bullshit. ~Dick Rutkowski
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    Quote Originally Posted by villanelle View Post
    JJ, can you confirm that Roth TSP money has essentially the same tax status as Roth IRA money? IOW, both are post-tax investments and that withdraws are then tax-free?
    Yes, for tax purposes they are both post-tax investments and both offer potential for tax-free withdrawals of both contributions and earnings at retirement (generally, after having account for 5 years and reaching age 59.5).

    I'm trying to figure out why for Army/Navy/Air Force the Roth contributions are stated in dollar amounts...
    J.J. Montanaro is a CERTIFIED FINANCIAL PLANNER practicioner with USAA Financial Planning Services one of the USAA family of companies.
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