BFM this Posted October 4, 2012 Share Posted October 4, 2012 It think DFAS' plan is to eventually get to the percentage amount for the Roth, but may take them a little more time to get the code changes programmed in the system. I'd like to see a percentage OR amount option. I'd rather be able to just divide $17k by 12 and call it a day. Link to comment Share on other sites More sharing options...
tunes Posted October 4, 2012 Share Posted October 4, 2012 So am I crazy in thinking the Roth TSP isnt the best for me right now? I'm only paying taxes on 3-4 months of income a year so wouldn't the traditional be better for me? Link to comment Share on other sites More sharing options...
schokie Posted October 4, 2012 Share Posted October 4, 2012 The Roth is far better for you. The traditional contributions in a tax free month won't be taxed when you withdrawal them, but the earnings on those contributions will be taxed. Since the earnings on the Roth are never taxed when withdrawn, both the contribution and earnings will always be tax free when contributed during a tax free month. You will also have a much lower tax rate on the other Roth contributions during your non-tax free months. The Traditional is useful to lower your taxable income, but you're already doing that by deploying so much. If you're only paying taxes on 2-3 months of income you're probably paying far lower taxes now then you will in the future when you're out of the Air Force and not deploying. That makes the Roth better. Any suggestions what it can rolled into or invested in without being penalized? I also would like to know if it's possible to roll my regular TSP balance over to the Roth account. Has anybody seen anything on this? My limited research on tsp.gov didn't turn anything up. I'm expecting I would just pay a one-time fee or pay taxes on the balance at my current tax rate. I would like to do that now during a low tax year. Link to comment Share on other sites More sharing options...
ThreeHoler Posted October 4, 2012 Share Posted October 4, 2012 You can't move the money from the Traditional TSP to the Roth TSP. Link to comment Share on other sites More sharing options...
Jughead Posted October 4, 2012 Share Posted October 4, 2012 You can't move the money from the Traditional TSP to the Roth TSP. True--which sucks if you've already maxed the contribution for the (calendar) year, now that the Roth option is just starting late in the (calendar) year (start of the fiscal year). Even if they don't want to allow conversions, I think there ought at least to be a recharacterization option for YTD 2012 contributions.... Link to comment Share on other sites More sharing options...
Finance_Guy Posted October 4, 2012 Share Posted October 4, 2012 (edited) I'd like to see a percentage OR amount option. I'd rather be able to just divide $17k by 12 and call it a day. You can with the amount option. Am I missing something? $17k by 12 = $1416. Enter $1,416 as your monthly amount--at least for Roth. Percentage is simple math as well, but I know what you mean. We could just ask if you want the max and check yes, but that would make more sense. Edit to add this: Members are strongly encouraged to start their ROTH TSP contributions via myPay. BTW, attached is the DFAS guide sent out to the Finance Offices. Now you have everything the Finance office (FSO) knows about this new program. Total system changes are not expected to be complete until Spring 2014. Also important to note this since some think it starts in the month they do the paperwork.... Effective Date. An election to start or change Roth TSP is effective the first of the month following the month of election. An election to stop Roth TSP contributions is effective at the end of the current month. ROTH_TSP_FSO_Base_Level_Procedures.pdf Edited October 4, 2012 by Finance_Guy Link to comment Share on other sites More sharing options...
BFM this Posted October 4, 2012 Share Posted October 4, 2012 You can with the amount option. Am I missing something? $17k by 12 = $1416. Enter $1,416 as your monthly amount--at least for Roth. Percentage is simple math as well, but I know what you mean. We could just ask if you want the max and check yes, but that would make more sense. I didn't see the amount option (haven't been there since they added the Roth option. Max check option: SHACK! Link to comment Share on other sites More sharing options...
tunes Posted October 4, 2012 Share Posted October 4, 2012 ok so i just started my roth in mypay. do i need to log into my tsp account and select which fund again? Link to comment Share on other sites More sharing options...
Jaded Posted October 5, 2012 Share Posted October 5, 2012 ok so i just started my roth in mypay. do i need to log into my tsp account and select which fund again? I had the same question today when I started my Roth TSP. I can't remember any of the TSP information I set up years and years ago, and the TSP website sent me in circles with the information about how to get my account info. Has anybody obtained their account number and PIN recently? Is there any other way to change your fund allocation? Can you readjust your allocation once there is money in there, or is it stuck in whatever fund you put it in to begin with? Link to comment Share on other sites More sharing options...
nsplayr Posted October 5, 2012 Share Posted October 5, 2012 Can you readjust your allocation once there is money in there, or is it stuck in whatever fund you put it in to begin with? Interfund transfers. Question for the masses just to QC my thoughts...does it make sense that a person should strive to contribute all of the 17K they can put into roth TSP annually while in a CTZE area? My thought was to save up money in something fairly liquid (money market fund, savings account, etc.) while home and then make the entire 17K contribution while deployed to get both the initial contributions and earnings tax free. You're losing out on whatever interest that money could be earning in the funds while you're home (certainly would be a higher rate than a savings account right now) but the long-term tax benefits would be worth it vs contributing some of that 17K while home and the contributions being taxed up front. Make sense or off base? Link to comment Share on other sites More sharing options...
Jaded Posted October 5, 2012 Share Posted October 5, 2012 nsplayer, To your first question: yes, Roth contributions with deployment tax free money makes a lot of sense (you'd never pay taxes on it). I would add this though - if you're deployed for 6 months of a given year, does it matter *when* you put the money in? At the end of the year, you're just going to add up all of your tax free earnings and and deduct it from your gross income. You aren't going to specify when you contributed to an ira/tsp. The money in the Roth is not going to be taxed when you take it out regardless, and the amount you put in will be the same. I don't think there's any difference between putting the money in an IRA/tsp during a month when you're deployed or putting it in during a month when you're home, as long as those months are both in the same year. If I'm wrong, chime in. Link to comment Share on other sites More sharing options...
Magellan Posted October 5, 2012 Share Posted October 5, 2012 I don't see any reason why this isn't a far better deal for the vast majority of the military. I could only see it being viable in 2 scenarios. 1. Someone who has a spouse that makes quite a bit of money that doesn't plan on working if/when they have kids. Therefore it is possible your tax rate now is higher than it will be in retirement. (My current situation FWIW) However, in this case as soon as that spouse stops working, that person would want to switch their contributions to ROTH as soon as their spouse had no/considerably less taxable income for that tax year. 2. Single/Divorced senior Captains and Majors with flight pay that intend to get out before 20 and not pursue any kind of military retirement would probably benefit from sticking with the Traditional TSP over the Roth TSP. In both of these cases you are probably in a situation where you should consult a financial planner, or at least do the research/math on your situation to determine which is better. For all other cases Roth TSP is much better than Traditional TSP. Link to comment Share on other sites More sharing options...
scudrunner12 Posted October 5, 2012 Share Posted October 5, 2012 So please correct me if I'm wrong (I'm sure no one on this forum will have a problem with that); a person can begin drawing from the traditional TSP right after retiring (while in your 40s or sooner than 59 1/2), but with the Roth TSP you have to wait until 59.5 like with the civilian version? Link to comment Share on other sites More sharing options...
ThreeHoler Posted October 5, 2012 Share Posted October 5, 2012 https://www.tsp.gov/PDF/formspubs/tsp-536.pdf You are correct on the Roth, I think also on the Traditional. Link to comment Share on other sites More sharing options...
Finance_Guy Posted October 5, 2012 Share Posted October 5, 2012 For all other cases Roth TSP is much better than Traditional TSP. What about a case where you put in to Roth for 10 years, the market tanks and you are left with essentially only your after-tax contribution dollars? Let's hope that wouldn't happen, but it could. FG Link to comment Share on other sites More sharing options...
Finance_Guy Posted October 5, 2012 Share Posted October 5, 2012 So please correct me if I'm wrong (I'm sure no one on this forum will have a problem with that); a person can begin drawing from the traditional TSP right after retiring (while in your 40s or sooner than 59 1/2), but with the Roth TSP you have to wait until 59.5 like with the civilian version? I think it is 59.5 for both. If you take out of the traditional before then (hardship, etc), you get tacked with a 10% penalty. So yes you can begin withdrawing but you get the penalty. Link to comment Share on other sites More sharing options...
Magellan Posted October 5, 2012 Share Posted October 5, 2012 If I had listened to my broker I would have a nice IRA – Roth – and TSP, but I would be missing about $750,000 in equity that I have right now. Moral of the story…diversify. CH, Not to be a jerk, but how did the real estate equity hold up compared to the other investments since 06 if you don't mind me asking? What about a case where you put in to Roth for 10 years, the market tanks and you are left with essentially only your after-tax contribution dollars? Let's hope that wouldn't happen, but it could. FG How would being invested in the traditional be different? Link to comment Share on other sites More sharing options...
Homestar Posted October 6, 2012 Share Posted October 6, 2012 (edited) ok so i just started my roth in mypay. do i need to log into my tsp account and select which fund again? Your Roth contributions mirror the allocation you already have set up, you can't make a separate investment allocation for just your Roth TSP. Edited October 6, 2012 by Homestar Link to comment Share on other sites More sharing options...
Finance_Guy Posted October 6, 2012 Share Posted October 6, 2012 How would being invested in the traditional be different? My tax liability was reduced by my portion of the contribution in the year contributed whereas with a Roth it is not. I guess my point is that if the Roth ends up providing no gain, then what is the benefit of a Roth? I guess in my scenario it benefits me to reduce taxes now and invest all I can--I don't plan to have a huge annuity that would exceed my current income when I retire. Dropping my annual income puts me in a 10% lower tax bracket which is a substantial saving in Federal taxes paid now. I guess there are multiple sides to the benefits of each. Link to comment Share on other sites More sharing options...
nsplayr Posted October 6, 2012 Share Posted October 6, 2012 FG, You're right for that situation, but I think most people around here are A) deploying frequently enough that they're in as low of a tax bracket at they're gonna get and B) are not planning as if there will be no gains from market investments. Even if B was true you could invest in the G fund exclusively, which is another big advantage of TSP in general. Link to comment Share on other sites More sharing options...
tunes Posted October 7, 2012 Share Posted October 7, 2012 Your Roth contributions mirror the allocation you already have set up, you can't make a separate investment allocation for just your Roth TSP. perfect! Link to comment Share on other sites More sharing options...
Finance_Guy Posted October 8, 2012 Share Posted October 8, 2012 FG, You're right for that situation, but I think most people around here are A) deploying frequently enough that they're in as low of a tax bracket at they're gonna get and B) are not planning as if there will be no gains from market investments. Even if B was true you could invest in the G fund exclusively, which is another big advantage of TSP in general. I agree with you on those in current low tax bracket and it would be a doomsday scenario if your investments did not gain. Many in retirement during the last market crash felt that pain. I guess I'm at a different stage in my life and no longer get the benefits of tax free income and allowances. Once you retire and add your retirement pay on to your civilian income, the tax scenario changes drastically. If you do the Roth early in life and while still on AD, I say it is a no brainer. But traditional TSP is a decent deal if you have a lot of tax-free contributions. Like I said there are many facets to these programs and people have to do the research and decide what might be best for them. Thanks FG Link to comment Share on other sites More sharing options...
tunes Posted November 1, 2012 Share Posted November 1, 2012 my Roth TSP options are not saving in mypay...everything is exactly as it was last month when i made the change...made the change again and it won't be in effect til Dec 1....wonder if it will actually work this time. Link to comment Share on other sites More sharing options...
ThreeHoler Posted November 1, 2012 Share Posted November 1, 2012 (edited) It takes a month for the change to take effect. Roth TSP became available 1 Oct, which means that the first month you can contribute to Roth TSP with MyPay is November. The government does not post your payment into TSP until the end of month paycheck. Therefore, if you elected a Roth TSP contribution in Oct, the pay would be withheld in November and deposited 1 Dec. Your mid-month LES should be lower than last month... Make sense? Edited November 1, 2012 by ThreeHoler Link to comment Share on other sites More sharing options...
Finance_Guy Posted November 6, 2012 Share Posted November 6, 2012 my Roth TSP options are not saving in mypay...everything is exactly as it was last month when i made the change...made the change again and it won't be in effect til Dec 1....wonder if it will actually work this time. This is not a problem with myPay. If you submitted it and received confirmation it should process. What displays in myPay is only your current active open items of your pay record. So those myPay requests won't show up until they process (after 1 Nov if you entered the request in Oct). So you can go in 20 times after the first time and it still will not show. The first one should process and those other 20 would reject since they are duplicate transactions. Go check myPay today and see if it shows up. I'll bet it is there with the 1 Nov effective date from your original request. The one you now see with a Dec start will reject since by the time it tries to process the start transaction it will reject since you cannot start something again that has already been started. Make sense? PM me if it is not showing up. Later. FG Link to comment Share on other sites More sharing options...
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