Roth TSP vs. Roth IRA

14,542 grads of the Ultimate Military Credit Cards Course already know why
The Platinum Card® from American Express is my #1 recommended card

Military Money Manual has partnered with CardRatings for our coverage of credit card products and may receive a commission from card issuers. Some or all of the cards that appear on this site are from advertisers and may impact how and where card products appear on the site. This site does not include all card companies or all available card offers. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

A buddy of mine recently asked:

Can you double dip Roth TSP and Roth IRA? (Contribute the maximum to both plans in one year)

YES! Technically, I wouldn't call it double dipping, because the IRS treats them completely differently. The Roth TSP is treated as an “employee retirement plan” while the Roth IRA is an “Individual Retirement Account.”

Your 2013 contribution limits are:

  • Roth TSP: $17,500
  • Roth IRA: $5,500

So if you were to deploy or go TDY to a combat zone at any point, during those months you were deployed you could put up to $23,000 of pay into your combo Roth TSP + Roth IRA.

That's $23,000 that goes in tax free, grows tax free, and eventually pays out tax free. That's like some 1%-er, Cayman island level tax planning right there.

3 thoughts on “Roth TSP vs. Roth IRA”

  1. While you make many good points in your posts, you needed to relook at the guidance for taxation of Roth contribution from tax-free pay as you are unfortunately mistaken…

    Reply
  2. I keep TSP in the back of my mind, but I’m mostly worried about the “bridge” income between this career and actual retirement, so I’m privileging Lending Club, savings, and other short-term investments. Plus, watching my TSP grow at an anemic rank after getting tanked a few years back has deterred me as well.

    Reply
    • I like to call it the “gap” income/assets, to cover from early retirement (right now I’m aiming for 40) to when I can access my retirement specific accounts (TSP, IRA, etc). Same concept though. The more I learn about the Roth option TSP and how low the expense ratios are kept, the more attractive it is to me. However, if I was much later on in my career (like you), I would definitely be singing a different tune.

      Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.