Question on ROTH TSP agency contributions for FERS employees

[eahinkle]

All percentages are based on gross pay. Your contributions, whether roth or traditional, have no impact on agency controbutions as long as you contribute 5% or more.

Good on you for thinking outside the box, though.

Example (assumes 25% tax):

Gross pay: $1000
Roth 5%: -$50
Tax 25%: -$250
Net check= $700
Agency contribution 5%: $50

Gross pay: $1000
Traditional 5%: -$50
Tax 25%: ($1000-$50)*.25 = -$237.5
Net check= $712.5
Agency contribution 5%: $50

Exactly what I needed thank you!

I see you're in Japan.... I hope to potentially find a transfer there as my active duty boyfriend will be stationed there starting this summer.

[mjedlin66]

Exactly what I needed thank you!

I see you're in Japan.... I hope to potentially find a transfer there as my active duty boyfriend will be stationed there starting this summer.

I love being in Japan. Here's some advice about getting a GS job over here-

Get married. When CHRO San Diego is reviewing all of the applications for any given job listing on USAJOBS, they have to follow a preference system. Veterans and military spouse are at the top of the preference pile. That means that any veterans or active duty spouses that meet the minimum criteria get offered the job first. Next, the priority goes to family member preference. Family members are defined as the dependents of active duty (non-spouse) AND family members of civilian employees who are already working overseas. Only after all veterans, military spouses, and family member eligibles are "cleared" do they make a job offer to non-preference candidates. That means that they have to determine that all of those people who applied either don't meet minimum qualifications, or those people have to be offered the job and turn it down.

My wife had three years of nursing experience as well as charge nurse experience when we moved over here. She started working in the hospital as a Red Cross volunteer while she was applying for paid positions. Several of the department heads knew her on a first name basis. She applied for several positions and wasn't selected because a military spouse met the basic qualifications. In some cases, the selected candidate was fresh out of school with no experience. Because she knew the hiring managers, they would express their frustration to her. They wanted to hire her. It took about 6 months of applying for jobs, as well as an O-4 calling CHRO and throwing their weight around to get her a job.

Now, if you are in a specialized field that most military wives don't qualify for, then you should be good to go. These include trades that are nuclear-related, for instance, because per our treaty, Japanese employees cannot do nuclear work. So we have nuclear-certified riggers and nuclear mechanics that are WG employees who get stationed over here at the shipyard. I am an engineer, and none of the engineers I know are military spouses. Some are veterans.

Lastly, I am not suggesting that you get married if you weren't already planning on it. I knew I was going to marry Kyla well before I got this job offer. In fact, I knew roughly 3 months into our relationship that I was going to marry her. Luckily I was smart enough to keep that to myself for another year while she warmed up to the idea of marrying a bearded gearhead with a beer gut. I was going to marry her anyway. The job offer simply lit a fire under my ass to buy the ring and get her father's blessing.

Good luck,

-Matt

[Longstreet]

Am on the younger end of the equation here, just 28, so hoping the Roth option will save me in the long run. Wife is also a Fed and she is going full Traditional for student loan/tax purposes at least until her 10 year loan forgiveness period is up.

After 10 years it may make more sense for her to just stay there and me to keep with the Roth so we're covered either way. That being said, I'm open to any suggestions for those that think going full traditional might be the better route (aside from the up front tax savings). I'm guessing that the majority of folks here went traditional because they're at later points in their career where Roth wouldn't make as much sense?

[ksmoly04]

I'll second Longstreet's line of thinking. I'm 35 now, have been using traditional up until now (just over 6 years), but am considering switching over to Roth for my contributions.

[bad70nova]

Looks like my way of thinking according to the poll is if line with many others on this site. I contributed directly to traditional for my first 10 years till Roth opened, now 100 in Roth minus 5% match to traditional. I have 11 years left till retirement and feel this is the better choice for me, but now you all have me rethinking this decision. If all goes the way planned I will have about 70% of my money in Roth and 30% in traditional. No matter what way you invest, just keep investing is my theory.

[evilanne]

For the younger folks...something to think about.
Using https://www.tsp.gov/PlanningTools/Calcu ... lator.html
Assuming Single, 6% RoR, assuming all traditional contributions for 2 different ending salary with TSP balance 10X salary at retirement with 30 years of service at 57.
$500,000 ..$1,000,000 TSP Balance at 57
$ 50,000 .. $100,000 Avg Hi3 Salary
$ 15,000 .. $30,000 Pension (30 Years=30%)
$ 17,900 .. $36,000 TSP @ 57
..$ 8,400 .. $16,800 SS Guestimate (Supplement from 57-62)
$ 41,300 . $ 82,600 Total Income ~82% of Salary

Using IRS tables, amounts vary over time so income flows vary looking at tables. This is why Roth makes more sense than one may think in your 80's or 90's
$ 48,600 .. $ 72,200 Potential Upside using life expectancy/RMD
$ 89,900 .. $154,800 Top Range for Total Income

The biggest variable that will impact your taxable Income in retirement that you have control over will be your investments. If you have higher rate of return or higher TSP balance it can easily push you into higher tax bracket with traditional TSP.

[BingoSam]

evilanne - Born and raised on Galveston Island. But we will be calling Florida home after retirement. Warmer winters, nicer Gulf coast beaches. Besides maxing out my regular and catch up TSP contributions, I also have both Roth and Traditional IRAs. Probably retiring in 6 years (59½) so I have access to my IRAs. The plan right now is to rollover TSP (except $250) to my Vanguard accounts.

I also have Vanguard accounts and plan to roll over my TSP into Vanguard when the time comes to retire. (About 20 more years for me.) Can you please educate me as to why it is smart to leave the $250 in the TSP? Is there a penalty for full withdrawal that you avoid by leaving the account open with a small amount? Thanks.

[galveston1]

I also have Vanguard accounts and plan to roll over my TSP into Vanguard when the time comes to retire. (About 20 more years for me.) Can you please educate me as to why it is smart to leave the $250 in the TSP? Is there a penalty for full withdrawal that you avoid by leaving the account open with a small amount? Thanks.

As long as a TSP account has $200 or more in the account, you may transfer money back into the TSP after retirement.

You might find this article interesting:

http://www.nitpinc.com/August-2015-newsletter.php

[eahinkle]

I love being in Japan. Here's some advice about getting a GS job over here-

Get married. When CHRO San Diego is reviewing all of the applications for any given job listing on USAJOBS, they have to follow a preference system. Veterans and military spouse are at the top of the preference pile. That means that any veterans or active duty spouses that meet the minimum criteria get offered the job first. Next, the priority goes to family member preference. Family members are defined as the dependents of active duty (non-spouse) AND family members of civilian employees who are already working overseas. Only after all veterans, military spouses, and family member eligibles are "cleared" do they make a job offer to non-preference candidates. That means that they have to determine that all of those people who applied either don't meet minimum qualifications, or those people have to be offered the job and turn it down.

My wife had three years of nursing experience as well as charge nurse experience when we moved over here. She started working in the hospital as a Red Cross volunteer while she was applying for paid positions. Several of the department heads knew her on a first name basis. She applied for several positions and wasn't selected because a military spouse met the basic qualifications. In some cases, the selected candidate was fresh out of school with no experience. Because she knew the hiring managers, they would express their frustration to her. They wanted to hire her. It took about 6 months of applying for jobs, as well as an O-4 calling CHRO and throwing their weight around to get her a job.

Now, if you are in a specialized field that most military wives don't qualify for, then you should be good to go. These include trades that are nuclear-related, for instance, because per our treaty, Japanese employees cannot do nuclear work. So we have nuclear-certified riggers and nuclear mechanics that are WG employees who get stationed over here at the shipyard. I am an engineer, and none of the engineers I know are military spouses. Some are veterans.

Lastly, I am not suggesting that you get married if you weren't already planning on it. I knew I was going to marry Kyla well before I got this job offer. In fact, I knew roughly 3 months into our relationship that I was going to marry her. Luckily I was smart enough to keep that to myself for another year while she warmed up to the idea of marrying a bearded gearhead with a beer gut. I was going to marry her anyway. The job offer simply lit a fire under my ass to buy the ring and get her father's blessing.

Good luck,

-Matt

Thanks Matt! I am aware that military spouses get priority.... not quite ready to take that step just yet but I'll keep it in mind for sure. My degree is in mathematics and I am currently hired as a computer scientist, so not a lot of females in my field. Quite possibly I will stay in CA for awhile and would wait until marriage to move over there but I'm at least exploring all my options for now

[mjedlin66]

You're set then. If you are working in computer science, then you won't have too much competition from the preference eligibles.

[BandidosMC]

I also have Vanguard accounts and plan to roll over my TSP into Vanguard when the time comes to retire. (About 20 more years for me.) Can you please educate me as to why it is smart to leave the $250 in the TSP? Is there a penalty for full withdrawal that you avoid by leaving the account open with a small amount? Thanks.

As long as a TSP account has $200 or more in the account, you may transfer money back into the TSP after retirement.

You might find this article interesting:

http://www.nitpinc.com/August-2015-newsletter.php

God to know. Thanks.

[Winner]

This is surprising to find out that more than 90% who cast their votes are not expecting to receive more than 75% of their salary (my simple math is 100% of high 3 (Feds) - average 25% taxes). This is not taking into consideration for most peoples already pay off their mortgage, so no more taxes benefit as most people think. Even if I'm going to retire tomorrow, my 100% contribution will go into Roth. Military members in combat zone should contribute 100% to Roth since your income are not taxable.

[mjedlin66]

This is surprising to find out that more than 90% who cast their votes are not expecting to receive more than 75% of their salary (my simple math is 100% of high 3 (Feds) - average 25% taxes). This is not taking into consideration for most peoples already pay off their mortgage, so no more taxes benefit as most people think. Even if I'm going to retire tomorrow, my 100% contribution will go into Roth. Military members in combat zone should contribute 100% to Roth since your income are not taxable.

I think that most people voted in the poll based on their interpretation of the question. Most people were trying to indicate that agency contributions are traditional.

I definitely believe that more than 6% of our forum uses Roth. Maybe I am wrong because the Roth TSP is relatively new, and contributions for new employees still default to traditional.

I use Roth because under Roth, all of my earnings are tax free. I may switch to traditional at some point late in my career so that I will have the opportunity in retirement to fill up the low tax brackets. Also, I expect to be in a higher tax bracket near the end of my career where the traditional would be more beneficial.

[Viper]

Something to think about.