Please Like, Comment, and Share my videos! 🔔 SUBSCRIBE HERE 🔔 Check out my complete playlist on TSP investing: 👇 👇 Watch My Other Videos Here 👇 👇 ★ Know Your TSP - The Thrift Savings Plan Investment Funds G/F/C/S/I ★ TSP Lifecycle Funds are TERRIBLE - Here is Why ★ How to Swing Trade in the Government TSP 📷 📷 My YouTube Equipment 📷 📷 ► My Camera 👉 ► My Wide-Angle Lens 👉 ► My Wireless Microphone 👉 ► My Shotgun Microphone 👉 ► My Lighting 👉 ► My Light Diffusers 👉 ► My GorillaPod 👉 ► My Tripod 👉 ================ The over-simplified explanation I have always received for why you should choose to invest in either traditional or ROTH accounts has always been if you have a high marginal tax rate now and will have a low marginal tax rate in the future: go traditional. If you have a low marginal tax rate now and will have a high marginal tax rate in the future: go ROTH. I never liked this explanation and did the math in this video to control for as many retirement variables as I could to fully understand the mathematical difference between the two accounts. My conclusion comes down pretty hard against the traditional TSP. With all things held constant, ROTH encourages people to save more and it guarantees tax free income after the age of 60. There is no downside. Anyone who earns less than $50,000 a year shouldn't be paying more than 11% in federal income tax. If they succeed in growing a TSP retirement account in to the millions, then they will even with a conservative withdraw rate will be paying a marginal tax rate on that income in the 20% range. In addition, wise and active planners/investors in their retirement SHOULD have multiple streams of income to allow them to retire in comfort (and hopefully as a millionaire). In retirement people could have a brokerage account, traditional or ROTH individual retirement accounts (IRAs), social security, rental income off owned properties, a part-time job or own a small business. Guaranteeing your government TSP as tax-free income in retirement should be a no-brainer. There are a couple reasons why I could see someone wanting to invest in traditional now. They might be a high income earner now (over $100,000) and they want the tax savings so they can be more aggressive in their investing in other areas (brokerage account or real estate). Another reason is if someone is in a lot of debt or experiencing financial hardship and they need the tax savings today to better gain control over their finances. The last reason why people might prefer traditional is that they do not expect to have a lot of money in retirement. They plan to have no other accounts, investments, or income sources beyond their TSP and Social Security and they know with their minimal withdrawals their annual income will never exceed $50,000 a year and they can stay in that low 11% tax income bracket. This feels like a bad retirement plan, but this is honestly what a majority of Americans do. ================ #ROTHTSP #TraditionalTSP #ROTHvsTraditionalTSP ================ DISCLAIMER: This video is for entertainment purposes only. I am not in any way acting as an agent or representative of the Department of Defense or United States Federal Government when presenting this information. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video. ADVERTISER DISCLOSURE: Jake is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to www.amazon.com. Additionally, other referral links are included and this channel does receive compensation for sending traffic to partner sites. Shopping through our links is an easy way to support the channel and we appreciate and are super grateful for your support! roth tsp vs traditional tsp, traditional tsp, traditional tsp vs roth tsp, roth vs traditional tsp, tsp roth vs traditional, roth tsp, tsp roth, roth tsp vs roth ira, roth tsp explained, traditional tsp explained, roth tsp military, roth thrift savings plan, roth tsp or roth ira, thrift savings plan, tsp, thrift savings plan explained, federal retirement planning, military retirement, tsp investing, blended retirement system, tsp funds explained, Tsp retirement, tsp help...(read more)
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ROTH TSP vs Traditional TSP - Which is Better? When it comes to planning for retirement, one important decision you need to make is whether to contribute to the ROTH TSP or the Traditional TSP. Both options have their own benefits and considerations, which we will explore in this article. Understanding the key differences between the two can help you make an informed decision that aligns with your financial goals and circumstances. First, let's understand the basics. The Thrift Savings Plan (TSP) is a retirement savings and investment plan offered to federal employees and members of the uniformed services. It allows individuals to contribute a portion of their income towards retirement, and offers tax advantages to help grow their savings. The Traditional TSP allows for tax-deferred contributions, meaning you don't have to pay taxes on the amount you contribute in the year it is earned. Instead, taxes are deferred until you withdraw the money during retirement. This can be advantageous if you expect your tax rate to be lower in retirement compared to your current tax rate. On the other hand, ROTH TSP contributions are made with after-tax dollars. This means you are taxed on the money you earn before contributing to your retirement account, but the withdrawals during retirement are tax-free. The main advantage of a ROTH TSP is that it allows your investments to grow tax-free, providing potentially greater savings in the long term. Choosing between the two plans ultimately depends on your individual circumstances. Here are some factors to consider when making your decision: 1. Current and Future Tax Brackets: If you are in a higher tax bracket now and expect your tax rate to be lower during retirement, the Traditional TSP may be more advantageous. Conversely, if you believe your tax rate will increase in the future, the ROTH TSP may be a better option. 2. Flexibility: The Traditional TSP has required minimum distributions (RMDs) once you reach age 72. This means you must withdraw a certain amount each year, regardless of whether you need the funds or not. With the ROTH TSP, there are no RMDs, providing you with more flexibility in managing your retirement income. 3. Estate Planning: If leaving a tax-free inheritance for your heirs is important to you, a ROTH TSP may be beneficial. Traditional TSP withdrawals are subject to income tax, whereas ROTH TSP withdrawals are tax-free for designated beneficiaries. 4. Contribution Limits: Both the Traditional TSP and ROTH TSP have the same contribution limits, currently set at $19,500 for individuals under 50 years old. If you're aiming to maximize your contributions, the plan that suits your tax situation best could be the deciding factor. Ultimately, the choice between ROTH TSP and Traditional TSP depends on your unique circumstances and goals. Consulting with a financial advisor can help you understand the potential impact of each option on your retirement savings. It's also important to note that you are not limited to just one type of TSP. You can contribute to both the Traditional and ROTH TSP simultaneously, allowing you to diversify your tax liabilities in retirement. In conclusion, deciding between ROTH TSP and Traditional TSP requires careful consideration of your current and future tax situations, flexibility needs in retirement, estate planning goals, and contribution limits. By assessing these factors, you can make an informed decision that aligns with your financial objectives, ultimately maximizing your retirement savings. https://inflationprotection.org/which-is-the-better-option-roth-tsp-or-traditional-tsp/?feed_id=121115&_unique_id=64c0d2e610aee #Inflation #Retirement #GoldIRA #Wealth #Investing #federalretirementplanning #Finance #investing #militaryretirement #roththriftsavingsplan #rothtsp #rothtspexplained #rothtspmilitary #rothtsporrothira #rothtspvsrothira #rothtspvstraditionaltsp #rothvstraditionaltsp #thriftsavingsplan #thriftsavingsplanexplained #traditionaltsp #traditionaltspexplained #traditionaltspvsrothtsp #tsp #tspfundsexplained #tsphelp #tspinvesting #TSPretirement #tsproth #TSPRothvstraditional #ThriftSavingsPlan #federalretirementplanning #Finance #investing #militaryretirement #roththriftsavingsplan #rothtsp #rothtspexplained #rothtspmilitary #rothtsporrothira #rothtspvsrothira #rothtspvstraditionaltsp #rothvstraditionaltsp #thriftsavingsplan #thriftsavingsplanexplained #traditionaltsp #traditionaltspexplained #traditionaltspvsrothtsp #tsp #tspfundsexplained #tsphelp #tspinvesting #TSPretirement #tsproth #TSPRothvstraditional
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