Why Aren't People Using Roth TSP | Christy Capital Management | Formerly RBI

[@davidcurry1818]

Amazing more don't use Roth TSP. I'm also about a year out, and didn't understand that whole Roth thing, thought earnings were still taxable. Now I have to do the dance to minimize post-retirement tax. Actually works out best, like 12% top after the dancing, to roll over to traditional IRA, then convert some to Roth IRA each year, still at 22% max tax, then live off pension, SS, dividends and some gains while balancing stocks and bonds each year. Young-uns, switch contributions to Roth TSP and save yourself a lot of hassle!!!

[@ChristyCapitalManagement]

Sounds like you have got a plan!

[@Dan-id9xf]

Regarding deductions, until the standard deduction is reduced for any reason it's unlikely a married couple would have enough itemized deductions to exceed the $24,000 standard deduction. So from our standpoint, itemized deductions don't even come into play when filing our taxes. With that said, this is a great video on the benefits of ROTH contributions. For couples in the 22% tax bracket, it will be next to impossible to reduce one's annual income in retirement to step down to the 12% bracket so ROTH makes a lot of sense to me given the likelihood of the brackets being increased in the future. However, those currently in the 24% bracket could see their annual retirement income drop into the 22% bracket so ROTH contributions may not be ideal for those folks whereas, taxes on the traditional withdrawals would end up being a tax benefit because of the lower bracket during retirement.

[@ChristyCapitalManagement]

Historically speaking taxes are relatively low now, the question is what will they do in the future. The tricky thing with federal employees is that often there will be multiple retirement income streams and their income doesn't drop enough to move to the next lower bracket.

[@joseCalderon1976]

Yup. Itemized deductions are not enough for me and my wife. We cleared $93k this year and we still had to pay back $2100 in Taxes,despite us claiming two kids and two more dependents. I put 5% into my TSP, so yeah. I started 5% into the Roth and 5%into traditional this year, but that's still not going to help. I need to adjust something so I don't end up with a bigger tax bill in 2023 because my wife is going to make like $15k more this year 🤔

[@dawannwilliams6301]

I agree with this. By the time the Roth component was introduced l had already been a federal employee over 20 years and contributing the maximum and was use to the tax benefits. I never thought 💭 about changing it. I will retire in a few years and be in the 24 percent tax bracket with just my pension and supplemental payment and with no mortgage. My TSP will just be my emergency fund per say. I would encourage any new employee to examine both options in detail to see what makes better sense for the future.

[@Dana-cb7vk]

I am using both- and a 4 year employee. I wanted to adjust my TSP funds from auto, to a logical spread: and then saw the option even existed so clicked it on. Now I stumbled this video (was a suggested video that algorithm must have matched me to when I was researching what all the funds were, and the best route to invest in).

[@wardwalker30]

This is a great and very complete video!

[@ChristyCapitalManagement]

Glad you enjoyed it!

[@tooeybrown700]

Some people with a military pension and also a federal pension plus TSP and SS will actually jump to a higher tax bracket upon retirement. They may just eat the tax payment on the conversion in early retirement to benefit from the growth in the tax free Roth over the twenty or so years during retirement.

[@ChristyCapitalManagement]

That's correct!

[@wdeemarwdeemar8739]

People should just wait to turn on SS until they have done some conversions.

[@General8675]

There are also lots of interactions with Military pensions and State/locality taxes, there can be a lot of different interactions that change incentives (NYC person here)

[@chancerobinson5112]

I’ve bee retired from Federal Service for 5 years. IMHO, the Roth Option was included too many years too late, many years after it was introduced to the general public and thus too late in the careers of many to bother with the conversion and then wait 5 years for the Roth to vest. I own a Roth outside the TSP and use it as a growth vehicle, which you can’t do in the TSP because the investment options are really geared towards conservation of principal. Looking forward, I’d hope and expect, many people, early in their careers, would take advantage of the Roth in the TSP. Even though it is a lot less aggressive than individual equities, the matching contributions (which go to your taxable account) more than make up for that. Give it time....

[@ChristyCapitalManagement]

We also wish that Roth would have been introduced years before it was. The Roth TSP can definitely be a great option for some Federal Employees' retirement retirement plans and goals. Thank you so much for sharing your thoughts and please continue to watch our videos for updated content.

[@brittanym.3222]

Can you have a Roth TSP and a Roth IRA outside TSP? And if so can you put in 6000 in each to max them both out?

[@rogerdoger9939]

@@brittanym.3222 Yes you can contribute to a Roth IRA. Unless you are above the earnings limits.

[@rogerdoger9939]

I don't know how someone can say that the C, S, and I funds are geared towards conservation of principal?

[@WtfYoutube_YouSuck]

@@brittanym.3222 Roth TSP does not max at 6000, it's like 19.5k in 2021

[@AIR_RAM_PERF]

He failed to mention that Gov tsp contributions are not limited to the 6,000 bucks non TSP Roth accounts are. You can contribute the entire 19,000 max per year all into your Roth!!! I learned only after changing my allocation after the first 6,000 to traditional for 4 years. Then I was speaking to a TSP rep and she informed me that TSP Roth was not limited to that 6,000 max… Since then, I’ve been maxing out 19,000 per year into my Roth TSP for over 8 years. I’m shocked that more people do not take advantage of the Roth. I’m also equally shocked at how many people go 20 years and never allocate out of the G fund… each time I run into someone who is about to retire and learn they are still in the G fund… I want to cry for them. Their accounts are so low compared to what they could have had..I’m talking several hundreds of thousands of dollar difference.

[@ChristyCapitalManagement]

You are absolutely correct! Any federal employee can contribution up to $19,500 to TSP in 2021 and, if over age 50, they can contribute up to $26,000. Mel and our other trainers cover contribution limits in other TSP videos on our channel which I would highly recommend you check out for more TSP information.

[@nancysaeteurn2165]

Can you have both Roth TSP and a outside Roth IRA ($6k)?

[@alrocky]

@@nancysaeteurn2165 Yes you may contribute $20,500 to Roth TSP and $6,000 to Roth IRA.

[@FlyFishingRealtor]

I can think of a lot of reasons NOT to contribute to Roth over Trad. 1. I’m making the most money in my career so I’m using traditional to reduce my taxable income. 2. I do think tax rates will go up, however bracket sizes have also gone up over time which will allow me to withdraw more at one of the lower rates. 3. I will be able to contribute more to traditional than I would to Roth because I’m not paying taxes so when you do the math, I have a larger egg growing than a Roth contributor so I can afford to pay my taxes later and come out even if I were in the same bracket. 4. Most people in the US are taking the standard deduction! This means some of those deductions you mentioned are pointless. First, your TSP deduction wouldn’t be a deduction at all if it were ROTH. Second, Mortgage deduction is not applicable to anyone taking the standard deduction. Third, Children are mostly grown by later in your high earning years and even the one or two left are only worth a few thousand each, if that. Fourth, Charitable contributions aren’t counted for anyone taking the standard deduction, with the exception of 2020 where you could get a measly $300 charitable deduction even while taking the standard deduction. 5. I won’t need as much income in retirement as I do now since I will no longer be contributing thousands of dollars to my retirement when I’m retired. 6. Something as simple as having just 1 rental property will allow you to reduce your taxable income significantly, keeping you in the lower tax bracket in retirement. Have a look at the brackets... you can withdraw a large amount each year and remain in the lower bracket especially if you are married. Finally, I wish I were going to make half as much in retirement as you suggest, but my pension from USPS will be under $1500/month with 20 years of service! And SS is set to be reduced by the time i hit full retirement age according to the SS website! Even if they turn that around somehow, doubtful, I will still only get maybe $1800/month from SS. Unless I delay longer. Furthermore, my TSP won’t be 500k, so I might be withdrawing less than what you expect the average person will. Last I heard the average person had less than 100k in their TSP so perhaps you’re directing your video to the wealthier TSP participants.

[@ChristyCapitalManagement]

Thank you for expressing your thoughts! For some Federal Employees everything you said is true, however, an innumerable amount of Federal Employees also experience a very situation. Retirement Benefits Institute has worked with thousands of Federal Employees over the past decade and we strive to provide content that all Federal Employees will find informative and useful as they prepare for retirement. Many Federal Employees find that they are in the exact same tax bracket in retirement due to their pensions and other forms of income such as Social Security, Military Retirement, Disability, and rental income among others. We have also seen that employees who do contribute to Roth instead of TSP and are fortunate enough to not see taxes go up over their career will actually come out even in the end by funding a Roth TSP versus the Traditional TSP and they have the safety net of knowing that if tax percentages increase in the future they will not be subjected to the rising tax rates when withdrawing from their Roth TSP. Please see the following link to view a case study of this: kzbin.info/www/bejne/jnmzn32XZpuHh5I In short, all Federal retirements are a little different and all Federal Employees have different goals and situations. It is always a good idea for every individual to scrutinize their personal situation and make the best decision for their unique circumstances. What works for one person will most likely not be ideal for another.

[@nestorrivera5717]

Well, in my case, when retired, I will get more money that will be taxable, so ROTH is my choice.

[@youtubewatcher6042]

How do state income taxes figure in? With the traditional, you save on state taxes as well as federal. That can be 5-10%. If you retire in a state that doesn't tax income, or exempts distributions.

[@markmiller3210]

Before blanket statements are made comparing Roth to Regular TSP you must know EXACTLY how the state you work in now taxes the pension of a federal civil servant. Approx. 9 states that normally have income taxes (e.g. NY and PA) consider the TSP "part of" their civil servants pension and DO NOT tax it on withdrawal in retirement. This is significant because if you work in one of these states (and assuming you will retire there) and contribute to the regular TSP - you can escape state taxes altogether (which are not insignificant in states like NY) by contributing to the regular TSP. As unbelievable as it seems the money is not state taxed going into the regular TSP AND it is not state taxed when withdrawn as it is considered "part of" the civil servants pension in these states. However - if you contribute to the Roth TSP - you will pay state taxes on the money going in. Everything else being equal- you are actually losing money by contributing to the Roth TSP instead of the regular TSP in these states.

[@itsjuststeve9655]

Remember the match is pre-tax so a bill is coming due even if you do Roth. The Roth TSP hits you in the take home pay. There's a couple of problems with understanding how to use the Roth. It takes about a month for the payroll change to take effect. There also isn't an effective "What If" calculator to see what you pay will be with your TSP elections. I've seen everything from 100% Pre-Tax to 100% Post-Tax (Roth) through trial and error. It took about 9 months to go through all the splits (.i.e. 50%/50% Roth, 75% Pre/25% Roth, etc.) Wouldn't it make sense to make your pre-tax deposits while working but convert that money by moving it to a Roth IRA upon retirement? I don't value tax certainty enough to pay more today than I can tomorrow. If someone were just starting out and had a lot of years to go, the Roth TSP may be more of a value.

[@ChristyCapitalManagement]

Steve, thank you for providing that insight that you have experienced as a Federal Employee! For some people it does make sense to wait to convert until after retiring due to their own personal goals and stage in life. Many Federal Employees find that they are still in the same tax bracket when they retire as they were while working due to their pensions and other forms of income such as Social Security, Military Retirement, Disability, etc. and therefore go ahead and begin building a bucket of tax-free money to have to use in retirement. This option, of course, is not the best option for everyone and many of the Federal Employees who are now close to retirement have never used the Roth TSP option because it was not an option when they first became federally employed.

[@alrocky]

"The Roth TSP hits you in the take home pay." If you contribute to Roth TSP or if you don't contribute anything to TSP you will still pay same tax so in either case you have same take home pay. "Wouldn't it make sense to make your pre-tax deposits while working but convert that money by moving it to a Roth IRA upon retirement?" No.

[@user-yi6nc6op7m]

Thanks for the clear explanation. Right now all my TSP is in traditional. I plan to retire within 5 years. Read somewhere that I have the option to convert all to Roth when I retire....any inputs on that?

[@FlyFishingRealtor]

Transfer out of TSP on retirement to Vanguard or Fidelity etc then covert (pay taxes) on whatever amount you wish each year into a Roth with the same company. It’s a matter of converting in the years you have the least tax burden. Lower earnings etc.

[@ChristyCapitalManagement]

Unfortunately, you cannot convert your TSP from Traditional TSP to Roth TSP while it is in the Thrift Savings Plan, but you can convert your Traditional TSP into a Traditional IRA and from there covert to a Roth IRA. Do keep in mind that this will create a taxable event and if not conducted properly it can cause you to pay substantial taxes. However, when converted correctly, we have seen this benefit many federal employees. Please be sure to consult a trusted CPA and/or Financial Planner to help you with your Roth conversion strategy. Please check out the blog below for more information on your Roth options as a federal employee: retireinstitute.com/roth-tsp-roth-ira/

[@ChristyCapitalManagement]

That is a way to convert to Roth though it may be smoother to move to a Traditional IRA and then convert to Roth. The important piece that you mentioned is being wise about when and how much you convert at a time. We recommend that a trusted CPA or Financial Planner is consulted when converting funds to Roth to avoid an accidental but possibly hefty tax bill.

[@iwilrage]

@@ChristyCapitalManagement but you can only put in 6000 at a time...so why would one have to worry about taxes

[@jasonmccann2652]

Will I lose out on to much interest if I cut my traditional contribution down to zero and start putting it into a Roth and starting over?

[@ChristyCapitalManagement]

The money in your traditional account will continue to accrue interest.

[@him2925]

Thanks for the Video

[@RandomBoxingGuy]

PLESE HELP... How do I change my contributions from Traditional to ROTH? I can't do it through MyPay or TSP websites... where/how do I change it?

[@ChristyCapitalManagement]

In most federal employees are able to use their electronic payroll system to make changes to TSP contributions. For example, using Employee Express, EBIS/GRB, LiteBlue, myPay, or NFC EPP. If you are unable to do use any of these, you can go to the TSP website and download the TSP-1 form, complete it, and turn it in with your agency. www.tsp.gov/making-contributions/start-change-stop-contributions/

[@Reaperman4711]

For the life of me, I can't even figure out 'how' to switch to the Roth, and I've been looking for a bit. 🤣 Lemme guess, Uncle Sam makes this as hard to do as that time I bought back my military time into FERS.

[@bighunter2837]

Do special provisions aka federal law enforcement have to wait until 59 1/2 to access the Roth TSP funds? Or can it be accessed at let's say 52 years of age when I'm eligible to retire on a pension and d access my traditional TSP funds?

[@ChristyCapitalManagement]

Check out our video here kzbin.info/www/bejne/mKnTmKSboZx1h8k for more details.

[@michaelvadney5803]

Thanks for the video. Unfortunately, I'm only a year away from retirement so I missed that one.

[@ChristyCapitalManagement]

The Roth TSP can definitely be beneficial to some Federal Employees depending on their personal goals and circumstances, but we have also worked with numerous federal employees who have been completely satisfied with only contributing to the Traditional TSP because it simply was better for their unique situation. Please also keep in mind that just because you did not use the Roth TSP as an employee does not mean that you cannot take advantage of other options such as a Roth IRA if it is a good fit for you.

[@michaelvadney5803]

@@ChristyCapitalManagement I plan on buying your advisory package in a month's time. I'm selling my home and that closes this month. I definitely was to get the full review. Seeya

[@brandonr4397]

Great info. Thank you.

[@ChristyCapitalManagement]

We are so happy to hear that you are enjoying our videos! Are there any specific topics you would like for us to cover in the future?

[@calvinlim9485]

It would take a lot needed in the TSP even when factoring in the role of the pension to get back to the same marginal tax rate if you are a higher grade. Considering the savings levels of even government employees for retirement, most people won't reach the levels needed in traditional accounts for Roth TSP or 401k to 'make sense'. Roth IRAs make sense in tandem with a traditional TSP or 401k

[@ChristyCapitalManagement]

The question most feds need to ask is "Do I think taxes are going down, staying the same, or going up?" and plan their retirement elections accordingly. If you think taxes are going down, then the traditional may be the way to go. Going up? The Roth might be the best decision.

[@calvinlim9485]

@@ChristyCapitalManagement that's true, and they also need to look at it from an overall point of view taking the pension and current traditional retirement account balances into the decision. If one doesn't have much saved in the TSP, it's unlikely they'll crack into the higher tax brackets anyways even with the pension and SS filling up the lower brackets along with the standard deduction. This is just going off the median and mean statistics. Plus even if someone just started out, saving can be hard, so the traditional still makes a lot of sense when it can lower your AGI in order to get the savers credits and be able to deduct student loan interest. That's not to say a Roth account doesn't make sense, but the Roth IRA in tandem with the traditional TSP works for an overwhelming majority of cases.

[@benjaminkoontz2711]

Our financial culture discourages ROTH investment by branding it as TAXED. Every mention of ROTH is associated with paying tax. I resent being misled through the years and wish I had understood that ANY investment you make with your earnings is AFTER tax. The proper response to the pervasive discouragement of "ROTH = tax" is ... So?! Every investment and piece of personal property we buy is also after tax. The takeaway should be that once you buy ROTH you own it tax free and clear.

[@charleshadley8604]

My question is, Is the limit to Roth 7,500 or can I put 22,500 into Roth and the 5% into traditional or however the money figures out for the 30,000 total??? 53yrs old

[@ChristyCapitalManagement]

That is a great question. Unfortunately, we can’t answer specific questions in the comment feed, but you can email me at [e-mail] and we can discuss your questions.

[@reidloscidem3562]

For many of us on the low GS scale, if we go Roth, we lose a notificable chunk of our net. That is just something we cannot do. As we climbed the ladder, maybe. For me, it's around GS 10 that I can start going Roth. Around me, the Boomers hold the high GS levels. And they're all talking about working until 70. No thank you. I'll move to the private sector.

[@ChristyCapitalManagement]

This is a wonderful example of how different everyone's personal situation is! Every federal employee needs to base their use of the Roth TSP on their individual needs and plans.

[@joesteel]

Do you suggest it all can but transferred to Roth? Or is it too late to contribute to a new Roth with 2 to 4 years left to retire?

[@ChristyCapitalManagement]

It may be worth opening the Roth account, even with 2 to 4 years left to retire.

[@alrocky]

It's likely more important to contribute maximum of [$20,500+$6,500=] $27,000 than worrying about Roth TSP vs traditional TSP. If you want Roth, contribute $6,000 to your *2021* Roth IRA and $6,000 to your 2022 Roth IRA. As you've only handful of working years left you most likely are at your highest salary and your highest federal tax bracket and thus should favor *traditional* TSP not Roth TSP.

[@djackson2560]

But will the Roth give the return that tradition will or is more like a savings account

[@ChristyCapitalManagement]

The individual funds will give the same rate of return whether you contribute to the traditional or Roth side.

[@djackson2560]

@@ChristyCapitalManagement thanks for the reply and the info!! You get a new subscriber

[@ShooterMedic1818]

@@ChristyCapitalManagement individual as in the C and S funds?

[@blureader1643]

Another reason is there aren't any conversion opportunities from the TSP. I believe if employees could convert some of their funds, they would. Federal employees who have been working over 25-30 years have all of their money in the traditional and do not have enough working years left to make a big difference, especially since they are not allowed to convert. I believe that 20 years from now, your chart will look very different since those employees will have the Roth TSP option from day 1.

[@ChristyCapitalManagement]

I believe you make a great point!

[@alrocky]

"I believe if employees could convert some of their funds, they would." Anyone wishing to convert their traditional TSP balance to Roth TSP would just as well be better off if they instead contribute to Roth TSP.

[@ohSilhouettes]

I was told you have to do 20 years AND wait until you're 60 inorder to get your money. Idk if it's true or not.

[@ChristyCapitalManagement]

The age 60 with 20 years of service rule is in reference to one of the FERS retirement eligibility options and does not affect your ability to withdraw from TSP.

[@WrvrUgoThrUR]

Can’t tell you how many times I’ve clicked away from a video that had no sound by at least 0:03

[@reversiontothemean6129]

I love these retirement planning discussions, even though I am not in TSP. The reason I watched this is that my daughter and her husband are just entering the TSP. They are both at the same pay rate. My opinion (their decision with their own planning obviously) was what if one chooses the Roth TSP and the other chooses the Traditional, each up to the 5% for the match. Then, each contribute to their own Roth IRAs. As incomes increase, keep ratcheting up until the personal Roth IRAs until maxed, then anything additional in the allotted household income for retirement planning, increase their TSPs over time.

[@ChristyCapitalManagement]

We're glad you enjoy the discussions. Point your daughter and her husband to this channel so that they can watch the videos too!

[@amattson6578]

Im 41 and plan on working 16-18 more years. Should I roll my traditional tsp balance into a roth tsp or just keep what i have in traditional and from now on start fully contributing just into roth tsp..

[@ChristyCapitalManagement]

We have a webinar on Tuesday, February 7th all about Roth. We’ll talk about this in detail. If you’d like to register, you can go to christycapital.com/webinar to get signed up!

[@amattson6578]

@@ChristyCapitalManagement sounds interesting but i will be working that day

[@alrocky]

Not all retirement plans allow you to convert your traditional 401(k) to Roth 401(k) and TSP does not allow you to convert t-TSP to Roth TSP.

[@ChrisMexEl88]

Is it only 5% I could match or it could be any other number above 5% that could match? For example if I put 10% the gov. Will give me the 10% more

[@alrocky]

Total maximum government match is 5%.

[@angelakleinhenz9356]

Roth wasn’t there when I first joined tsp w/ usps

[@vinceordonez5878]

Hello - I am 58 yrs old, retired 1/2022. I left my TSP money in G fund. Can I move it to ROTH IRA?

[@alrocky]

If you have traditional TSP balance the process may typically be: traditional TSP > traditional IRA > Roth IRA. You will owe tax on the amount your convert from traditional to Roth. If you have Roth TSP balance and roll over to Roth IRA there is no tax involved.

[@angelakleinhenz9356]

Can I put 5%now in Roth tsp with 10% going in traditional tsp?

[@alrocky]

You may contribute 5% to your Roth TSP and contribute 10% to your traditional TSP.

[@polyfaya3140]

Been in for 3 years and I just noticed that mine is not matching at 5% why is this happening?

[@alrocky]

Are you military and in BRS or civilian in FERS?

[@teeduck]

Ever think people need all their income just to survive.

[@AyalSharon]

Your arguments about the Roth ignore state and local income taxes, which complicate the argument for the Roth. For example, for income between $90k-$215k, NYC residents pay a marginal tax rate of 24% federal + 6.33% state + 3.87% city = 34.2% total when they contribute it to a Roth. But if they contribute it to a Traditional, and retire in the near future in FL or TX (where there is no income tax), they only pay the federal 24% when they withdraw the money. A difference of 10%. So in this scenario, Traditional is a better choice than the Roth.

[@ChristyCapitalManagement]

I suppose we could include every possible state and local income tax scenario, but boy that would be a long video! :)

[@AyalSharon]

@@ChristyCapitalManagement Residents of California pay a 9.3% income tax in the bracket $61k-$312k. It's not only New Yorkers. So yes it is argument that these people should consider Traditional instead of Roth, or maybe splitting 50/50 between the two types of accounts.

[@OPDNETWORK]

I though you cant go over 6k in roth

[@alrocky]

$6,000 contribution limit refers to Roth/traditional *IRA*

[@spaztikenigma]

Nah, people aren’t using it because they have a Roth IRA elsewhere.

[@gw5309]

I retired from DOD Federal service last July with nearly 35 years. I did an in service rollover of my TSP a year and a half before that. I had ROTH balance of zero. Why? Because I didn't trust that the greedy idiots inside the beltway wouldn't change the rules on ROTH taxation eventually. Think about it....have they ever been able to resist taxing ANYTHING? The same reasoning is why I got my money out of TSP where I control it. They already have control of two legs of my retirement (SS and FERS). At least I have control of one.

[@ChristyCapitalManagement]

You pulled your money out of the TSP, would you tell us your thoughts on how you invested your money outside the TSP? And maybe an update on how it's doing?

[@AncientShadow]

I would also like an update of this

[@gw5309]

@@ChristyCapitalManagement I rolled 80% into a fixed annuity that we won't touch for 8 -10 years. My thought was we don't need it now, but later when runaway inflation, or social security means testing (don't think for a minute they won't try this) reduces our buying power we will fall back on it. It is a safety net that will pay us as long as either of us are living. The other 20% of TSP is in a Charles Schwab account and invested in their most conservative S&P funds. We have drawn some of this out to invest in real estate and will probably be drawing more out this year for the same purpose. As far as how things are doing, I don't worry about it. I sleep very well and honestly don't pay much attention to the stock market. I know that some will deride annuities, but I like to remember this; The insurance companies in this country came out of the great depression largely unscathed. Most were able to honor their commitments.

[@jimmypark6759]

I think another main reason why people don’t go Roth is that you have to be minimum of 59.5 years old to withdraw. Some federal employees are eligible to retire at 50-52 so you’re basically saying you can’t touch that until seven or more years later.

[@kckuc310]

It’s expensive, it’s post tax