Author Topic: Roth TSP vs Roth IRA  (Read 4124 times)

Goatee Joe

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Roth TSP vs Roth IRA
« on: November 03, 2013, 07:50:26 PM »
Apologies if this has been asked here before.  Here's my situation and question:

For tax year 2013, I've already maxed out a Roth IRA ($5500).  I'm on the way to maxing out my yearly amount for contributions to my 401K at work ($17,500).  It's actually a Thrift Savings Plan (TSP) since I work for Uncle Sam.  TSP just started offering a Roth TSP option this year.  Can I contribute to the Roth TSP, even though I've already done the full Roth IRA?  Or are those limits independent of each other?

I believe I can, so long as the combined total of my contributions to the Roth TSP and Traditional TSP don't exceed $17,500.  I've googled the heck out of this but can't find any answers to this exact situation.

Thanks in advance for any advice!

curler

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Re: Roth TSP vs Roth IRA
« Reply #1 on: November 03, 2013, 08:58:04 PM »
As far as I am aware, you are correct.  Just like the 401(k) limits and the IRA limits are separate, so are the TSP limits and the IRA limits.  whether you contribute to a Roth or Traditional plan doesn't matter.

Emerald

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Re: Roth TSP vs Roth IRA
« Reply #2 on: November 04, 2013, 07:53:17 AM »
That is my understanding as well.  I don't have a Roth IRA, I contribute both to the Traditional and Roth TSP.


Nords

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Re: Roth TSP vs Roth IRA
« Reply #3 on: November 04, 2013, 08:09:43 AM »
Can I contribute to the Roth TSP, even though I've already done the full Roth IRA?  Or are those limits independent of each other?
I believe I can, so long as the combined total of my contributions to the Roth TSP and Traditional TSP don't exceed $17,500.  I've googled the heck out of this but can't find any answers to this exact situation.
Yep. 
The Roth TSP and the Roth IRA are two totally different concepts with separate contribution limits. 
The Roth TSP and the traditional TSP limit is indeed $17,500 total, with catch-up contributions for those who turn age 50 during the year.  In addition, military deployed to a combat zone (and earning tax-exempt pay) can contribute up to a total of $51K combined to the TSP/Roth TSP.

Here's an excerpt from Mike Piper's 2014 update:
http://www.obliviousinvestor.com/2014-tax-brackets-standard-deduction-and-other-changes/
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For 2014, most retirement account contribution limits remain unchanged:
$5,500 for Roth and traditional IRAs, with an additional catch-up contribution of $1,000 for people age 50 or older, and
$17,500 for 401(k), 403(b), and most 457 plans, with an additional catch-up contribution of $5,500 for people age 50 or older.
The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a SEP IRA) is increased from $51,000 to $52,000.

Here's a more detailed description of the difference between the Roth TSP and the Roth IRA:
http://the-military-guide.com/2012/03/19/is-the-roth-thrift-savings-plan-right-for-you/
USAA's CFP J.J. Montanaro says:
Quote
I think you may be “mixing and matching”–but Roth IRA and Designated Roth 401(k) are definitely different. Roth TSP is what the IRS calls a “designated Roth account”–contributions are not treated the same as Roth IRA (you can’t withdraw at anytime without taxes or penalties) and withdrawals are limited to the same rules as a Traditional TSP or 401(k).

Goatee Joe

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Re: Roth TSP vs Roth IRA
« Reply #4 on: November 06, 2013, 06:29:25 PM »
Thanks guys and thanks Nords for the links.  I'm not in the military, but that advice on TSP still applies to pretty much any federal employee who's making TSP contributions.  Very helpful!

 

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