You may not realize it yet, but the long-delayed Roth alternative to the Thrift Savings Plan could be an exciting new addition to your retirement toolkit.
I'm actually grinning ear to ear as I consider the possibilities the new Roth TSP offers. I periodically bemoan the fact that participation in the TSP among military service members hovers somewhere south of a paltry 40%, so I regularly encourage readers to sign up and jump-start their retirement savings. Now with the addition of a Roth TSP, there's another compelling reason for service members to start or increase what they're saving for retirement.
The TSP is the federal government's version of a 401(k). It allows participants to invest money for retirement through payroll deductions. Contributions to the original, traditional version of the plan are made on a pretax basis (your contributions reduce the amount of income upon which you are taxed), grow tax-deferred and withdrawals are taxed as ordinary income in retirement.
It allows you the potential to create a tax-free stream of income in retirement. In my mind, tax and free are two very cool words — when said in one breath. Unlike the original TSP, contributions to the Roth version do not reduce your tax bill now; however, those contributions and all of their earnings over the years will potentially be available to you tax-free once you're 59½ and have had the account for at least five years.
Not excited yet? Here are four good reasons to get you so fired up about "tax-free" you'll sign up for the TSP or bump-up what you're saving:
Now that the Roth TSP is here, consider signing up and taking control of your financial future.
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