Start Roth TSP at age 54?

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Q. I am 54 years old and I have 30 years of federal service under FERS. Should I start a Roth TSP at age 54? I was born in March 1958. I plan to work until I hit full Social Security, which, I think, is 67 or maybe 66. Bottom line: If I were to start the Roth TSP until retirement at age 67 or 66, which is 13 or 14 years from now, is it worth my time and effort?

My current Thrift Savings Plan is about $230,000 as of July. Six years from now, about March 2018, I will be drawing an estimated $3,500 monthly taxable from my time in the Army Reserve. So, again, should I start a Roth TSP or stick with the current TSP?

A. I think that you’re approaching the question the right way — by asking if there’s a compelling reason to complicate your investment program by adding Roth TSP contributions. I can’t come up with one.

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5 Comments

  1. I am 54 and in the exact same sitution. I am going to do a ROTH on 1 SEPTEMBER BECAUSE of the tax situation between the two. I have to pay taxes on the 285K I have in TSP and will look for the ROTH to provide me the tax free income to do that. Plus I am changing my life insurance to Universal life so I can give it tax free to my children.

  2. Adding a Roth TSP does not complicate your investment program but may enhance it. But your primary investment objective should be to max your TSP every year. Deciding between Roth TSP vs t-TSP is a secondary concern. You may invest ($17,000 + $5,500 = ) $22,500 every year and if you do so for the next 10 years you’d contribute $225,000 in your TSP account – almost the amount you now have.

    You should also consider investing in a Roth IRA @ $6,000 a year.

  3. Why wouldn’t you take the time to invest in a Roth with that much time left to work? I understand that with a Roth, you pay taxes on the money you put in, not the money that grows and you withdraw. Also, you do not have to withdraw it all at age 70. Seems like a better deal to me.

  4. To clarify Christine’s post, the Roth TSP is subject to 70 1/2 age rule. To avoid taking the required Roth TSP withdrawal, rollover the Roth portion of your TSP account into a Roth IRA before age 70 1/2.

  5. To clarify what Al R wrote above, what Mike wrote was correct. You would be over complicating your situation only because of the inflexibility of TSP. You cannot only roll over the Roth portion. When rolling over the account, you would be rolling over both traditional and Roth balances. So you would be taking out monies from the low cost TSP for presumably an IRA with higher costs. Based on today’s rules, a rollover of your TSP will include both balances and not either the traditional or Roth.

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