Page 94 - The Informed Fed--Hearn Wealth Management

First, the regular TSP, like the Roth TSP, is funded via payroll
deduction. The money going into a regular TSP account is tax deferred.

s funded with after-tax money. In other
words, you pay the taxes on it before you invest. So, when it comes out,

it is all yours!
Secondly, and this is very important, there are no income limits on

Roth TSP contributions. With a Roth IRA, if you make more than a
certain amount, you cannot contribute. But with the Roth TSP you can
contribute after-tax money. So, you could have a regular TSP account

and a Roth TSP account at the same time; the only limit is the IRS limit
on the amount an individual can contribute in one year. Mr. Long says
-

Roth contributions are taken out of your paycheck after your income

is taxed. When you withdraw funds from your Roth balance, you will
receive your Roth contributions tax free since you have already paid taxes

, as long
½ or disabled, and your withdrawal is made at
least 5 years after the beginning of the year in which you made your first

Roth contribution.
Traditional (pre-tax) contributions, which lower your current taxable

income, give you a tax break today. They grow in your account tax-
deferred, but when you withdraw your money, you pay taxes on both the
contributions and their earnings. Here are some additional facts that you
need to know: 1) The 1% agency contribution does not vest for three

years. 2) new employees are automatically enrolled with a 3% Roth
contribution, 3) Congress may require force enrollment, and 4) unlike

the traditional Roth, the Roth TSP has RMD at age 72. Traditional Roth
IRAs cannot be transferred to the Roth TSP.

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