Conversions of the Traditional portion of a Thrift Savings Plan to a Roth IRA may not work for everyone, but if done properly and at the right time, you could see more net income from your TSP in retirement. In this episode, we will discuss key points you should know before taking any actions and provide 3 strategies of when a Roth conversion may be best for you. Welcome to Financial Planning 4 Feds. We are dedicated to educating federal employees on how to maximize value from their government benefits by developing and executing a financial plan. In this episode we will go over: - 3 considerations when comparing Traditional and Roth IRAs - Key Points to know before you convert an IRA - 3 strategies of when a conversion might be best for you 0:00 Intro 1:43 Why choose a Roth? 2:30 Key Points to know before you convert an IRA 5:49 3 strategies of when a conversion might be best for you Footnotes for: Roth Conversion at Retirement Strategy This example uses a base GS 13, Step 5 with no locality pay ($90,064). Calculations start at age 62 with a $250,00 investment. Distributions are 4% after tax figures beginning at age 65. Traditional IRA Returns are 6% representing a balanced portfolio and Roth IRAs at 8% representing a larger portion of growth investments. Footnotes for: Marginal Bracket Sweet Spot Strategy This example uses a base GS 13, Step 5 with no locality pay ($90,064). Calculations start at age 35 with a $250,00 investment. Distributions are 4% after tax figures beginning at age 65. Traditional IRA Returns are 6% representing a balanced portfolio and Roth IRAs at 8% representing a larger portion of growth investments. Footnotes for: Marginal Bracket Sweet Spot Strategy This example uses a base GS 13, Step 5 with no locality pay ($90,064). Calculations start at age 35 with a $250,00 investment. Distributions are 4% after tax figures beginning at age 65. Stock Returns are 8% and bonds at 4%. Both portfolios have a 50% stock and 10% bond crash in the 3rd year. Growth Portfolio is 75% stock and 25% bond. Planned Strategy is 25% bond and 75% stock before crash with 100% stock after crash. Federal employees and their spouses are invited to complimentary educational workshops covering their federal benefits. For details, visit: Federal Benefit Resources: Would you like to know more? ...(read more)
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Should You Take Advantage of a Roth Conversion with Your TSP? When it comes to planning for retirement, one of the key decisions you need to make is how to handle your Thrift Savings Plan (TSP). The TSP is a retirement savings and investment plan offered to federal employees and members of the uniformed services. One option worth considering is a Roth conversion, which allows you to convert your traditional TSP contributions into a Roth account. But is this the right move for you? Before diving into the details, it's important to understand the key differences between a traditional TSP and a Roth TSP. With a traditional TSP, your contributions are made pre-tax, meaning they are deducted from your income before taxes are applied. This lowers your taxable income in the year of contribution, but you will be taxed when you make withdrawals in retirement. On the other hand, a Roth TSP allows you to contribute after-tax dollars, meaning you don't get an immediate tax deduction. However, your withdrawals in retirement are tax-free. So, should you consider a Roth conversion with your TSP? Here are a few factors to consider before making the decision: 1. Future Tax Rates: One of the key factors to consider is your expected future tax rate. If you anticipate that your tax rate will be higher in retirement than it is currently, then converting to a Roth TSP might be advantageous. By paying taxes on your contributions now, you can avoid higher taxes in the future. 2. Time Horizon: Another factor to consider is your time horizon until retirement. If retirement is still several years away, you might have enough time for your Roth TSP to grow significantly. The longer your investments have to grow tax-free, the greater the benefit of a Roth conversion. 3. Other Sources of Retirement Income: Analyze the other sources of retirement income you anticipate having, such as a pension or Social Security benefits. If these income streams will already push you into a higher tax bracket, a Roth conversion can help you manage your overall tax liability in retirement. 4. Cash Flow Considerations: It's important to consider your current financial situation and cash flow when deciding on a Roth conversion. Converting to a Roth TSP requires paying taxes on the converted amount in the year of conversion. Therefore, it's essential to ensure you have sufficient funds available to cover the tax liability without impacting your overall financial stability. When considering a Roth conversion, it's crucial to consult with a financial advisor or retirement specialist who can consider your unique circumstances and provide personalized advice. They can help you evaluate the potential tax implications and assess whether a Roth conversion aligns with your long-term financial goals. In conclusion, a Roth conversion with your TSP could be a beneficial strategy depending on factors such as your anticipated tax rate in retirement, your time horizon, other retirement income sources, and your current financial situation. By analyzing these factors and seeking professional advice, you can make an informed decision regarding the future of your TSP and ensure a comfortable retirement. https://inflationprotection.org/is-a-roth-conversion-with-your-tsp-worth-considering/?feed_id=126624&_unique_id=64d74637118e3 #Inflation #Retirement #GoldIRA #Wealth #Investing #Boston #CertifiedFinancialPlanner #CFP #federalemployees #federalretirementhelp #federalretirementplanning #feeonly #Fiduciary #FinancialPlanning #rothconversions #RothIRA #rothirainvesting #rothiravstraditionalira #roththriftsavingsplan #rothtsp #thriftsavingsplan #thriftsavingsplanretirement #tsphelp #TSPretirement #tspstrategy #tsptips #ValorWealthPartners #washingtonDC #ThriftSavingsPlan #Boston #CertifiedFinancialPlanner #CFP #federalemployees #federalretirementhelp #federalretirementplanning #feeonly #Fiduciary #FinancialPlanning #rothconversions #RothIRA #rothirainvesting #rothiravstraditionalira #roththriftsavingsplan #rothtsp #thriftsavingsplan #thriftsavingsplanretirement #tsphelp #TSPretirement #tspstrategy #tsptips #ValorWealthPartners #washingtonDC
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