February 21, 2008 • June Walbert
Q: I am currently contributing about $10,000 to my TSP and
$4,000 to my Roth IRA. My question is, should I stop contributing to my
Roth IRA and put that $4,000 to my TSP?
-Robert, Kaiserslautern, AEE
A: Somebody famous once said that "variety is the spice of life."
Sometimes that can get you in trouble (number of credit cards, etc),
but in this case you're right on track! I recommend you keep up both
the TSP and your Roth
IRA. This year (2008), you will be able to increase your Roth IRA
contribution to $5,000 if you continue to meet the income eligibility
requirements. And you should definitely consider doing that! As you
know the Thrift Savings Plan helps reduce your tax bill now and you pay
taxes later upon withdrawal during retirement. The Roth IRA, on the
other hand, is funded with after-tax money now and if held for at least
5 years, any growth is withdrawn tax free at retirement (age 59½ or
later). So one plan helps taxes now, the other later — the best of both
worlds.
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Hello,
I just kinda a similar question as you asked. Myself, I would fully fund the Roth IRA, then once that is done, then up the percentage on your TSP.
Tom
Posted by: Tom | November 25, 2008 at 05:38 PM