Roth TSP Withdrawals
Our focus here is Roth TSPs asset balances not monthly contributions.
After separating from federal service, the Military Servicemember (now a Veteran) can allow their retirement assets to remain in the ROTH -TSP.
The veteran will be able to continue to:
Enjoy the TSP's low administrative expenses.
Move money into the Roth-TSP account from an IRA or eligible employer plan.
Change your investment mix with inter-fund transfers.
Leave money in the TSP until you reach age 70½.
Avoid paying current Federal income taxes on any taxable amounts (and possibly penalties).
Avoid enticements from investment and insurance salespeople to move TSP retirement assets as they are exiting the service. Note: The 2017 TSP Modernization Act, Veterans have greater ‘combined’ withdrawal capabilities so now salespeople really need compelling reasons (Other than a commission driven decision) to transfer TSP assets.TSP Withdrawals | Traditional versus Roth IRA
TRADITIONAL TSP: The servicemember will owe taxes on any traditional TSP contributions and their earnings. Generally, all withdrawals are taxed as ordinary income…as would your salary. The servicemember can continue to defer taxes by transferring or rolling over your payment to a traditional IRA or an eligible employer plan such as the Roth 401(k), 403(b), or 457(b).
ROTH TSP: The veteran would not owe taxes on Roth contributions. The veteran has already paid them as these dollars represent investment made of ‘TAKE HOME’ pay. Also, Roth TSP or IRA earnings are not taxed if they have crossed the “Dateline.’ Roth earnings that are withdrawn are considered tax free if five (5) years have passed since January 1 of the calendar year in which the Veteran made your first Roth contribution and have reached age 59 ½.
Roth Earnings: Tax Free withdrawals if the veteran has a permanent disability or have died.
Withdrawals are becoming more flexible. See Update.
Thinking about Annuity Income Options from your TSP?
TSP Transfers | Traditional versus Roth IRA
General Rule of Thumb - Transfers
The ROTH TSP will accept your transfer of your Roth 401(k) and your Roth 403(b).
The TRADITIONAL TSP will accept your transfer of your 401(k), your traditional IRA, your SIMPLE IRA, your 403(b), or your 457(b)
Low Cost and Simplicity
The TSP’s simplicity and low expenses would still be at work for you. The TSP’s equity funds replicate indexes that include the stocks of large American companies, the stocks of medium and small American companies and the stocks of international companies. LIFECYCLE FUNDS
Use Form TSP-60-R to request a transfer of Roth money from a Roth 401(k), 403(b), or 457(b) into the Roth balance of your Thrift Savings Plan (TSP) account. Roth TSP is like a Roth 401(k), not a Roth IRA. TSP does not accept transfers from Roth IRAs.
Use Form TSP-60 to request a transfer or to complete a rollover of tax-deferred money from an eligible retirement plan into the traditional (NON-ROTH) balance of your Thrift Savings Plan (TSP) account.
Get Important Tax Information about Your TSP Withdrawal and Required Minimum Distributions
Years ago, you invested in Roth TSP. You did this because the ROTH TSP offered substantial tax advantages for active duty service members who are generally in a low tax bracket. Now it is time to make the right withdrawal option to enhance or supplement your retirement income. We hope that this information will help empower you to make an informed decision…for you.