Do I Need a Traditional or Roth Thrift Savings Plan (TSP)?

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If you’re a government worker with a Thrift Savings Plan (TSP) from your employer, congratulations! With low management fees to matching contributions, you have one of the best investing tools available. You can prepare well for a comfortable retirement by contributing to your account. However, you have a choice: deposit to a traditional or Roth TSP. Your selection will determine when you pay income tax on contributions and earnings. Here’s a breakdown of the key differences but you can also work with a financial advisor to help you choose the right investments for your situation.

What Is a Thrift Savings Plan (TSP)?
A Thrift Savings Plan (TSP) is an investment account that government employees, including military members, receive as a benefit. TSPs have minimal administrative costs and allow participants to contribute pre- or post-tax dollars. Click HERE to read more.

SECURE Act 2.0” May Impact Your TSP

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The “SECURE Act 2.0” would change the age for required minimum distributions (RMD) from the TSP and require catch-up contributions to be Roth contributions.

Most readers and investors in the Thrift Savings Plan (TSP) have probably never heard of the Securing a Strong Retirement Act of 2021 (H.R. 2954), dubbed the “SECURE Act 2.0.” But, if it passes into law, it contains significant changes for TSP investors and the age for starting a required minimum distribution (RMD).

Predicting whether a complex bill like HR 2954 will become law is difficult at best. In this case, the bill does have 98 Cosponsors—51 Democrats and 47 Republicans. Moreover, the bill is likely to be considered in the House next week. In short, there is a reasonable chance that this bill will become a new law.

Summary of the SECURE Act 2.0

This bill makes changes to employer-sponsored retirement plans, including the TSP. These changes include increasing the age at which participants are required to begin making a required minimum distribution (RMD). Click HERE to read more.

2022 in Review: 2023 Federal Pay Raise, Federal Employee Vaccine Mandate and More

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2023 Federal Pay Raise is Largest in 20 Years

Federal employees are getting the largest pay raise in about 20 years in 2023. Many were anxious to find out what the pay raise in 2023 would be in light of rampant inflation in 2022 and a sharp increase in 2023 FEHB premiums.

Many FedSmith readers expressed frustration that the pay raise was not larger given the decline in our quality of life the country has seen this year with rapidly rising costs on everything from food to electricity, but the reality is that the pay raise is technically not based on inflation since the federal pay raise each year is determined by a political process.  Click HERE to find out more.

Dismal 2022 TSP Performance: One Fund Down 26% for the Year

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2022 TSP fund performance was dismal. One TSP stock fund was down 26%. What happened after the last significant yearly loss?

2022 TSP Fund Performance Went from Bad to Worse.

As 2022 comes to a close, many Thrift Savings Plan (TSP) investors will be glad to see this year come to an end as it has put a dent in the overall performance of the TSP funds. The year did not start off well. Click HERE for full article.

The Secure Act 2.0 has been approved by Congress and is awaiting President Biden’s signature into law.

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There is late breaking tax & retirement planning news:

The Secure Act 2.0 has been approved by Congress and is awaiting President Biden’s signature into law.

This new law expands upon The Secure Act 1.0 which was approved in December of 2019. Some of the highlights are:

  • Extended the RMD age to age 73
  • Reduced the penalty for missing an RMD
  • Allows employer matching to the Roth
  • Increased the contribution to a QLAC
  • Increased retirement plan catch-up contributions for those age 60-63 in 2025
  • Allows a 529 to Roth IRA rollover starting in 2024
  • Creates Roth SEP IRA or SIMPLE IRA options

Allows for a $50,000 IRA Charitable Rollover to a Charitable Gift Annuity or Charitable Remainder Trust