Roth v Traditional Contribution

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kaclemen
Posts: 42
Joined: Fri Oct 31, 2014 1:13 pm

Roth v Traditional Contribution

Post by kaclemen »

The MAX IRA contribution is $18K/yr for TSP.

You can contribute 18K traditional if you want or you can split between ROTH/Traditional contributions.

For TSP, is there a max ROTH contribution ($5500)? Or does the TSP allow for a contribution beyond $5500 for ROTH contribution (limit by other ROTH IRAs)?

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: Roth v Traditional Contribution

Post by ArrieS »

Contribution Limits for 2018 - $18,500.

You can contribute up to the max of $18,500 as ROTH contributions.


https://www.tsp.gov/PlanParticipation/E ... imits.html
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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alphaalpha
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Re: Roth v Traditional Contribution

Post by alphaalpha »

What is income limit on using a ROTH?

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ArrieS
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Re: Roth v Traditional Contribution

Post by ArrieS »

alphaalpha wrote:What is income limit on using a ROTH?
Are you talking about the ROTH IRA or TSP?
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

hmarkway
Posts: 61
Joined: Thu Apr 12, 2012 8:14 am

Re: Roth v Traditional Contribution

Post by hmarkway »

kaclemen wrote:The MAX IRA contribution is $18K/yr for TSP.

You can contribute 18K traditional if you want or you can split between ROTH/Traditional contributions.

For TSP, is there a max ROTH contribution ($5500)? Or does the TSP allow for a contribution beyond $5500 for ROTH contribution (limit by other ROTH IRAs)?
TSP is similar to a 401k, NOT an IRA. An IRA has a $5500 limit, but the TSP's limit is the same as a 401k at $18,500 (plus catch up if eligible). You can split the $18,500 into ROTH or Traditional however you wish.
Current Allocation: 50/50 split F/G Funds, as of 1/3/2018
Strategy: Loosely following Daily Seasonal #16198 until I figure out my 2018 plan when all the main plans start diverging.

hugehail
Posts: 602
Joined: Mon Mar 12, 2012 10:05 pm

Re: Roth v Traditional Contribution

Post by hugehail »

There should be no confusion on roth and traditional TSP contributions. The limit is 18500 for Roth and 18500 for traditional. Or you can use a mix of both such as 9200 for Roth TSP and 9300 for traditional. Ive been maxing out Roth TSP contributions for the past 5 years. The limit back in 2013 was 17K if I remember correctly. On average, the yearly max contributions go up by about $250-300/yr but they only raise it in increments of 500. Therefore we dont see the limit go up every year. It is more difficult to max out in Roth contributions since this is after tax money so you see a smaller paycheck when you do this but then you dont pay taxes later upon withdrawal. The only times I would consider switching to tradtional TSP is if I needed spending money for purchases and just generally pressed for money or if contributing to Roth TSP put me in a higher tax bracket on the part of my income that was taxable at the 22% rate. If you are married and your taxable income is 85K in 2018 (22% rate starts at 77K) you would pay 22% on the top 8000 of your income. Putting that 8K in traditional and using it as a tax shelter and not paying 22% on any of your income would make sense to me. When you retire just make sure you dont withdraw so much in one year that it puts you in a higher tax bracket. Having said all of this, I would only recommend Roth TSP if you can afford it and arent hurting for income. You need to live for the present too. There is no guarantee we will live much past retirement.

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alphaalpha
Posts: 37
Joined: Thu Oct 02, 2008 2:04 pm

Re: Roth v Traditional Contribution

Post by alphaalpha »

So for the TSP Roth there is no income limit above which cannot utilize or put TSP money into like there is for the IRA Roth ?

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: Roth v Traditional Contribution

Post by ArrieS »

alphaalpha wrote:So for the TSP Roth there is no income limit above which cannot utilize or put TSP money into like there is for the IRA Roth ?
Correct, no limitation for the TSP.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

mmmmmbeer
Posts: 917
Joined: Wed May 11, 2016 11:00 am

Re: Roth v Traditional Contribution

Post by mmmmmbeer »

ArrieS wrote:
alphaalpha wrote:So for the TSP Roth there is no income limit above which cannot utilize or put TSP money into like there is for the IRA Roth ?
Correct, no limitation for the TSP.

And that's how I'm gonna get the man... 18500 going in Roth the next 7 years... gets me beterrn 200-400k.. draw traditional only for the next 9.5 years.. Roth Balance of 2-5 mil... winning!
Those who 'abjure' violence can do so only because others are committing violence on their behalf.

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ArrieS
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Re: Roth v Traditional Contribution

Post by ArrieS »

mmmmmbeer wrote:
ArrieS wrote:
alphaalpha wrote:So for the TSP Roth there is no income limit above which cannot utilize or put TSP money into like there is for the IRA Roth ?
Correct, no limitation for the TSP.

And that's how I'm gonna get the man... 18500 going in Roth the next 7 years... gets me beterrn 200-400k.. draw traditional only for the next 9.5 years.. Roth Balance of 2-5 mil... winning!
As long as it's in the TSP you can't pick traditional or ROTH for withdrawals. It will be withdrawn based on percentage. I.E. 60% ROTH 40% traditional, monthly withdrawal of $5,000 will be comprised of 60% ROTH and 40% traditional funds.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

raymonster
Posts: 17
Joined: Wed Aug 09, 2017 2:09 am

Re: Roth v Traditional Contribution

Post by raymonster »

kaclemen wrote:The MAX IRA contribution is $18K/yr for TSP.

You can contribute 18K traditional if you want or you can split between ROTH/Traditional contributions.

For TSP, is there a max ROTH contribution ($5500)? Or does the TSP allow for a contribution beyond $5500 for ROTH contribution (limit by other ROTH IRAs)?

2018 TSP Contributions and Effective Date Chart

Image

2018 TSP Catch-Up Contributions and Effective Date Chart

Image
Curr:100 SFund 15Aug2018DWCPF
Prev:100 CFund 14Aug2018
38878

08/31/18 PIP 7.46%
07/31/18 PIP 4.99%
06/30/18 PIP 2.7%
05/31/18 PIP 3.94%
04/30/18 PIP 4.52%
03/31/18 PIP 3.09%
02/28/18 PIP 7.93%
01/31/18 PIP 13.49%
12/31/17 PIP 16.0%
11/30/17 PIP 15.6%
10/31/17 PIP 15.62%
09/30/17 PIP 13.03%
08/31/17 PIP 11.89%

SnareMV17
Posts: 176
Joined: Thu Jan 10, 2013 9:06 am

Re: Roth v Traditional Contribution

Post by SnareMV17 »

hugehail wrote:There should be no confusion on roth and traditional TSP contributions. The limit is 18500 for Roth and 18500 for traditional. Or you can use a mix of both such as 9200 for Roth TSP and 9300 for traditional. Ive been maxing out Roth TSP contributions for the past 5 years. The limit back in 2013 was 17K if I remember correctly. On average, the yearly max contributions go up by about $250-300/yr but they only raise it in increments of 500. Therefore we dont see the limit go up every year. It is more difficult to max out in Roth contributions since this is after tax money so you see a smaller paycheck when you do this but then you dont pay taxes later upon withdrawal. The only times I would consider switching to tradtional TSP is if I needed spending money for purchases and just generally pressed for money or if contributing to Roth TSP put me in a higher tax bracket on the part of my income that was taxable at the 22% rate. If you are married and your taxable income is 85K in 2018 (22% rate starts at 77K) you would pay 22% on the top 8000 of your income. Putting that 8K in traditional and using it as a tax shelter and not paying 22% on any of your income would make sense to me. When you retire just make sure you dont withdraw so much in one year that it puts you in a higher tax bracket. Having said all of this, I would only recommend Roth TSP if you can afford it and arent hurting for income. You need to live for the present too. There is no guarantee we will live much past retirement.
I understand avoiding higher tax brackets in the short term, but in the long run it is more beneficial financially to pay the taxes up front, assuming you are still several years away from retirement. With the growth that many TSP Accounts are showing these days (and optimism on the daily strategies), your investment will grow substantially and you'll end up paying a much larger tax bill in the long run on the growth. It becomes less of a tax rate game and more of a pay now on contributions only or later on contributions PLUS growth, which could be substantial.

One caveat to always remember is that no matter how you plan your tax situation or what you decide between traditional or roth, the government match and all of it's earnings will be 100% in the traditional TSP. You WILL have to pay taxes on all of that down the road. No escaping the tax man.
"Get your money for nothin', and your chicks for free."

Following TSPCalc strategy #64902.

mmmmmbeer
Posts: 917
Joined: Wed May 11, 2016 11:00 am

Re: Roth v Traditional Contribution

Post by mmmmmbeer »

ArrieS wrote: As long as it's in the TSP you can't pick traditional or ROTH for withdrawals. It will be withdrawn based on percentage. I.E. 60% ROTH 40% traditional, monthly withdrawal of $5,000 will be comprised of 60% ROTH and 40% traditional funds.

Wrong brochacho! The new TSP Modernization Act is changing that. From TSP's announcement:

"By the way, in addition to the changes made
by the new law, we’re also adding the ability to specify
how much of your withdrawal should be Roth and how
much should be traditional; withdrawals currently come
out pro rata from both sources."

That can be found on the first page... left column.


https://www.tsp.gov/PDF/formspubs/tspfs10.pdf

Wooo hooo!!!!!

Gamechanger bro...
Those who 'abjure' violence can do so only because others are committing violence on their behalf.

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evilanne
Posts: 2067
Joined: Thu May 14, 2015 6:52 pm

Re: Roth v Traditional Contribution

Post by evilanne »

You can contribute $18.5K to TSP Roth (no income limitation but if you income is higher you pay more taxes) plus $5,500 (6,500 age 50+) to Roth IRA but income limits do apply for IRA (see https://www.rothira.com/roth-ira-rules) phase out begins at different points depending on your filing status. If you are single phase out starts at $120K modified AGI.

SnareMV17
Posts: 176
Joined: Thu Jan 10, 2013 9:06 am

Re: Roth v Traditional Contribution

Post by SnareMV17 »

It has nothing to do with this convo, but the back door Roth IRA makes the income limit almost non existent.
"Get your money for nothin', and your chicks for free."

Following TSPCalc strategy #64902.

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Fund Prices2024-03-27

FundPriceDayYTD
G $18.14 0.01% 1.00%
F $19.09 0.26% -0.68%
C $82.11 0.87% 10.42%
S $82.19 1.48% 6.61%
I $42.68 0.56% 6.21%
L2065 $16.38 0.84% 8.36%
L2060 $16.38 0.84% 8.36%
L2055 $16.39 0.84% 8.36%
L2050 $32.73 0.71% 6.94%
L2045 $14.91 0.67% 6.56%
L2040 $54.37 0.63% 6.20%
L2035 $14.34 0.58% 5.77%
L2030 $47.66 0.53% 5.35%
L2025 $13.14 0.31% 3.40%
Linc $25.60 0.24% 2.79%

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