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Thanks for the help. I think I'll be avoiding the TSP Roth option as I already max out my Vanguard accounts there.
A good rule of thumb is that once your marginal tax rate is in the 30% or higher brackets, then you should switch to the traditional type accounts to save on taxes now. I don't know any officers with a taxable income over $178,650, which is when the first marginal rate over 30% kicks in. The 28% tax bracket doesn't even kick in until $85,650.
Question: If I have been contributing to TSP for 7 years, should I switch over to the Roth option? Should I try to transfer money from TSP to the Roth TSP?
I just worked my last day in the Navy, and at some point will start a thread talking about the things I did to prepare for retirement, but will post this for now. We converted our regular IRAs to Roths when the law changed (letting us spread the tax charge over 4 years) and I've maxed out TSP since it was introduced. We can pay the cost to roll my TSP into a Roth account, but I haven't decided if it is worth it or not yet (leaning towards not). My advice to any JO would be to max out a Roth IRA first, then contribute as much as you can to a regular TSP.
Explain your reasoning here... your Vanguard is an IRA right? If it is, then your TSP Roth has nothing to do with that.
You can max out the Roth IRA (the limit is $5,500 next year) AND the Roth TSP (the limit is $17,500 next year). Both TSP types have the same limit, and both IRA types have the same limit.I guess I still don't understand the difference. I can max out ($5000 a year) my standard Roth IRA with Vanguard/USAA/whomever (Vanguard in my case with funds of my choosing) AND the Roth TSP (which is $5,500?)? I get economics and investing; but I don't know tax law beyond the very very very basics - including this, obviously. If that's the case, can I be pointed to a publication that says so? My undserstanding was that the Roth TSP counted just as much towards the overall total of your yearly Roth contributions for a tax shelter. If that's the case, I choose Vanguard because of their variety of funds, ability to contribute when I want (not just per paycheck), ease of use of their website and near-instant updating of my returns/losses and great customer service - all of which I find TSP to be lacking (annoying website, contributions at the end of the month only, inaccurate return on investment - perhaps not 'up-to-date' is better - hard to reach customer service comparatively, etc.)
While fees are certainly a consideration, especially in long-term investing, there's an argument to be made in favor of maxing out the Roth IRA before the Roth TSP. First and foremost, obviously, is the vast selection of funds and ETFs you're able to pick from, as opposed to only five that TSP offers. Even if you pay a significantly higher fee (an actively managed fund at the extreme), it could still outperform the comparable TSP fund. Or, at the very least, it could have a better risk-return profile, which is to say that in theory it should perform better over the long term.DanMa, prior to the advent of the Roth TSP your plan of maxing out your Roth IRA and then adding to the TSP was spot on. Now with your relative low income and low tax liability and the Roth TSP option I recommend people max out their Roth TSP before investing in their Roth IRA. This is due to the lower cost associated with investing in the TSP.