Feds like TSP’s Roth option

Government workers have a relatively new investment option and Senior Correspondent Mike Causey says it's growing in popularity because of its tax break.

Feds and members of the uniformed services seem to like the Thrift Savings Plan’s relatively new Roth investment option.

A lot!

How come?

Taxes: Now or later!

Regular TSP contributions are made on a pretax basis. That means you get a break now, but will see a big chunk of your total TSP balance eaten up by taxes when you start either voluntary or mandatory withdrawals. With a Roth, you are investing after-tax money. That means when you start withdrawing money from your Roth TSP account (assuming you’ve met the IRS rules) it is all yours. No taxes on that money in retirement.

From a tax standpoint, it comes down to this: Do you want to pay Uncle Sam now or later. Apparently, many feds have decided that taxes probably are not going to go down in the future, regardless of which political party controls Congress or the White House. And with a Roth, your nest belongs entirely to you, not Uncle Sam. The caveat is that the Roth money has to be in the account for at least five years and you have to be 59 ½ when you withdraw it or you pay taxes on the earnings in your Roth account.

Currently, the average FERS investor in the TSP has an account balance of $116,928 in the regular TSP and an average of $7,647 in the Roth TSP.

The average account balance for CSRS investors is $120,046, while the Roth average for that group is $12,268.

For the uniformed services, the average TSP account is $18,755 and the Roth average for that group is $4,246.

As of April the federal TSP had 4.9 million participants and the plan was worth more than $465 billion. About 15 percent of the participants have Roth accounts.

Nearly Useless Factoid

By Michael O’Connell

Today, June 23, 2016, is National Pink Flamingo Day.

Source: Lawn-greetings.com

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