When you invest in the Thrift Savings Plan (TSP), you can choose between two tax treatments for your contributions: the traditional option and the Roth option.
Do you know which approach is right for you?
Keep in mind: You can make both traditional and Roth contributions, and you can change your contributions any time.
Under the traditional TSP, your contributions are deducted before taxes.
With the Roth TSP, your contributions are deducted after taxes. However, when you withdraw money from a Roth TSP in retirement, the withdrawals (including the earnings on your initial investment) are tax free — as long as you are 59 and a half or older and have contributed for at least five years.
A Roth TSP may make sense if you expect to pay higher taxes in retirement than you are paying now, but there are other important considerations, experts say.
To learn more about the Roth TSP, watch the four-minute online video, “Is the Roth TSP Right for Me?”
For more on TSP and other money management resources, visit the financial wellness site on LiteBlue.