TSP (Roth vs Traditional)

Forum|Forum|1 year ago
December 5, 2024
1 reply
0 views

Hello. I am an active duty soldier serving in the army and I invest in the Thrift Savings Plan (TSP). I am younger American and I make under 40k after taxes. Which option would you deem to be better for me tax-wise, Roth or traditional (currently it's traditional)? I have other investment accounts plus a separate traditional IRA outside of TSP. I use the contributions I make to the IRA as a way of lowering my capital gains taxes. I don't know if I'll be in the same tax bracket in 15-20 years and I'm not sure if my overall tax situation will change or not but should I which the TSP to Roth (since I already have a traditional IRA) or should I keep it as is? Would I have to switch it if my tax situation changes in the future or no? I'm just trying to determine what's optimal for me TSP wise, Roth or traditional. You advice would be greatly appreciated. Thank you

Not A Product Question

robtm

Employee

Not knowing all the details of your situation it's difficult to give you advice. Nobody knows the future or what your situation will be in 15-20 years from now or what it will be in retirement. In my opinion the Roth IRA will be the better investment in your retirement than the traditional IRA because though you pay taxes on the initial investment it will grow tax-free and when you take distributions they will also be tax-free. In your case I would consider moving both of your traditional IRA's to ROTH-s. But not all at once. Each year move a percentage of one IRA so as not to impact your taxes. I would start with the one outside the TSP. When one IRA has been completed do the same with the other one. Any new contributions should be to the Roth, if possible. The above is just my opinion and may or may not be the best for you. I'm currently retired and wish I had done this when I was working. 20-20 hindsight.