Roth TSP vs. Roth IRA

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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…

  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.

    • 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.

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