Is a Roth Thrift Saving Plan (TSP) account a good option for young service members?

Military Families December 19, 2012|Print

Generally, yes. With a Roth Thrift Saving Plan (TSP) account, participants invest after-tax dollars (i.e., money that has already been taxed) that cannot be taxed again upon withdrawal in retirement. While plan participants don’t receive an immediate tax write-off for the amount of their contribution, they receive tax-free earnings after age 59½ if their account has been open at least five years. Also, unlike Roth IRAs, there are no maximum income limits for plan participation.

Roth TSP accounts are especially attractive for young service members because they have four to five decades of tax-free investment growth ahead of them. In addition, they are likely to be in a lower tax bracket (e.g., 15% marginal tax bracket) currently than they will be later in life (e.g., 28% tax bracket), so a current tax will be worth less than a future one. For additional information, refer to https://www.tsp.gov/whatsnew/roth/compareRoth.shtml.