Thanks for the links MDM! Sorry for not doing a complete case study format, I wanted to keep things simple to focus on the question of rolling a Roth TSP to a Roth IRA. The Kitces article was quite helpful, and showed me the importance of opening the Roth IRA now as you recommended. I have read a ton of Nords' articles from the military guide. (paging Nords if you're reading this...any insight on rolling Roth tsp to Roth IRA for early (age 41) retirement?) I have read that rolling a Roth TSP to Roth IRA is doable, I just haven't seen any sources cited to be sure. Assuming it is doable. Could I just contribute to Roth TSP for the next 15 years, then (at age 41), roll it into a Roth IRA and be able to draw the funds before age 59 1/2 since the rollover would be a "contribution"?
As for the Traditional vs Roth TSP, roughly 1/2 of my income is not taxed, and the wife has a 529 and 403b that are both traditional, no Roth option. We stay in the 15% bracket and I already have my TSP contributions set for Roth. So if sticking with Roth is doable for FIRE, I will do so; if not, I need to know now so I can switch to traditional and get ahead of things.
Thanks for paging me. I'm a little slow on searching this week.
Yes, Michael Kitces' advice is valid for Roth TSPs. Once you roll it over to a Roth IRA then you can withdraw the amount of the rollover (but not the gains since the rollover). I'd check this next claim with a CFP to be absolutely sure, but I think if the Roth IRA has already been in existence for five tax years then you can start withdrawals from the rolled-over Roth TSP as soon as it's in the Roth IRA. If you roll the Roth TSP over to a new Roth IRA then I'd wait five tax years.
But keep in mind that when you retire from active duty you'd first spend down your taxable savings/investments, then your Roth IRA contributions, and the principal of any traditional IRAs or 401(k)s that you converted into a Roth IRA. Only after you use up all of those other choices would you tap the funds that were compounding in your Roth TSP at the world's lowest expense ratios.
And now a behavioral finance tip: all of this conversion and penalty-free early-withdrawal advice is legal and it works. However I doubt that you'd end up needing it before age 59.5 because you're saving enough in taxable accounts (while you're on active duty) that those taxable funds (along with your pension) will bridge most of the gap. Military retirees have tremendous human capital, and while you're ER'd you're almost certain to find some sort of income from part-time work or an interesting bridge career or an entrepreneurial hustle. But when someone is in their 20s it's a lot easier to persuade them of the wisdom of Roth TSP rollovers than it is to convince them that they'll have more money than they need.
So now you're good either way.
Keep up the high savings rate-- if you can invest 40% of your gross income for up to 20 years then you won't even need the active-duty pension to be financially independent. The reason I bring this up is because I think planning to stay on active duty for 15 more years is a ludicrous fantasy. Instead you'll make life easier on yourself if you take it one obligation at a time. As long as you're feeling challenged & fulfilled, then stay on active duty. But when the fun stops, whether that's at 10 years or 18 years, then be ready to leave active duty for the Reserves or National Guard. You'll still be able to earn a Reserve/Guard pension at age 60, and in the meantime your quality of life in the Reserves/Guard will take a huge leap upward. You'll earn enough from your drill pay and any part-time bridge career to cover the savings gap until your pension starts at age 60. It's also a lot easier to enjoy the Reserve/Guard for 30 than it is to stay on active duty for 20.
The key is keeping up the high savings rate until you retire, because then when the assignment officer makes that unrefuseable offer you don't have to feel obligated to grimly clench your jaw and stick it out to 20.
One final point: your total military compensation is lightly taxed, and it usually makes more sense to pay your taxes now and contribute to the Roth TSP (and Roth IRA). But if your spouse's income skews your income up into the 25%-28% personal income tax bracket, then it may be better to contribute to a traditional IRA and save a little on taxes. When you retire (whether or not you have an active-duty pension) then you can convert a little of the traditional TSP or IRA to a Roth IRA each year as part of the ladder.
But if you're in the 15% tax bracket now, even after Roth TSP and Roth IRA contributions, then I think you're doing "good enough".