Why You Should Steer Clear of the Roth TSP (and Roth Conversions): 5 Compelling Reasons

We get questions about the Roth TSP, Roth IRAs, Roth conversions, etc. on a regular basis. There are some big pot holes federal employees should avoid. Thiago Glieger, financial advisor for federal employees, discusses some of these main reasons and how to avoid the big mistakes. ----------------------------------------------------------------------------------------------------------------------- ►Want to see more of our videos? Click here: ►Visit our federal employee retirement website: ►If you're interested in setting a time to meet with Thiago Glieger, click here: ►If you'd like help from a team of Certified Financial Planner (CFP) professionals that specialize in working with federal employees, learn more here: -- Subscribe to TFC channel and click the Bell icon to be notified when we release new content. The Fed Corner is a purpose built channel of information and financial planning strategies specifically designed for Federal Employees. We're fiduciary financial planners by trade, and we talk about money, building wealth, navigating your federal benefits, financial planning, the economy, the markets, and more. The things we talk about on here are not to be taken as advice, visit our site for disclosures and seek help from appropriate advisors. Copyright © 2023 The Fed Corner - All Rights Reserved. Investment Advisory services offered by Risk Management Group d/b/a RMG Advisors, a registered investment adviser. Reviewing, posting, commenting or otherwise engaging on this site is not intended to be endorsements of RMG, our advisors or our services, and are not compensated. Activity on this site is not a substitute for working one-on-one with an investment advisor and does not constitute an engagement. RMG only provides advisory services when a financial services agreement has been executed. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. #TSP #federalretirement #federalemployees...(read more)

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5 Reasons to AVOID the Roth TSP (and Roth Conversions) When it comes to retirement planning and investment options, the Roth TSP and Roth conversions may appear enticing at first glance. However, it is crucial to thoroughly assess these options before committing to them. Here are five reasons to avoid the Roth TSP and Roth conversions: 1. Tax implications: The primary allure of the Roth option is that contributions are made after-tax, meaning withdrawals in retirement are tax-free. However, this benefit can be misleading. The tax savings realized by contributing pre-tax to a traditional TSP or IRA can often outweigh the potential tax-free withdrawals. 2. Higher tax brackets in retirement: Many individuals assume that they will be in a lower tax bracket during retirement, making the Roth option advantageous. However, this assumption may not always hold true. Lifestyle changes, unexpected expenses, or inflation can increase income needs, potentially placing retirees in a higher tax bracket than anticipated. Consequently, withdrawals from a traditional TSP or IRA may be taxed at a lower rate during retirement. 3. Loss of tax deductions: By contributing pre-tax to a traditional TSP or IRA, individuals benefit from immediate tax deductions. This reduces taxable income in the present and can lead to significant savings, especially for higher earners. Choosing the Roth option eliminates these valuable tax deductions, reducing immediate tax benefits. 4. Limited eligibility for Roth conversions: Higher-income earners are often limited in their eligibility to contribute directly to a Roth IRA. Similarly, limits on income for Roth conversions make it inaccessible for many individuals. The availability of these options may vary depending on an individual's income and tax filing status, further limiting their benefits. 5. Uncertain future tax laws: It is impossible to predict future tax rates and laws with certainty. While the Roth option may seem appealing now, tax laws can change significantly over the long term. Political, economic, or social shifts might result in higher or additional taxes on Roth accounts, eroding their potential advantages. Ultimately, the decision to opt for the Roth TSP or Roth conversions rests on individual circumstances, income levels, and retirement goals. It is essential to consult with a financial advisor or tax professional to evaluate the potential benefits and drawbacks based on personal circumstances. In conclusion, while the Roth TSP and Roth conversions may have initial appeal, individuals should consider the tax implications, potential loss of deductions, higher future tax brackets, limited eligibility, and unpredictable tax laws. Taking a comprehensive approach to retirement planning ensures that individuals make informed decisions best suited to their individual needs and goals. https://inflationprotection.org/why-you-should-steer-clear-of-the-roth-tsp-and-roth-conversions-5-compelling-reasons/?feed_id=141254&_unique_id=65185f8f0cb78 #Inflation #Retirement #GoldIRA #Wealth #Investing #federalretirementplanning #FEHB #FERS #fersplanning #fersretirement #myfederalretirement #OPM #planmyfederalretirement #PlanYourFederalRetirement #SES #thefedcorner #tsp #ThriftSavingsPlan #federalretirementplanning #FEHB #FERS #fersplanning #fersretirement #myfederalretirement #OPM #planmyfederalretirement #PlanYourFederalRetirement #SES #thefedcorner #tsp