Q. TSP adding the Roth allows for the benefits of having a Roth during the accumulation phase, but the TSP Roth totally limits the benefits of having a Roth during the distribution phase. The Roth TSP is separate investment tool from the traditional TSP but during the distribution phase, TSP does not allow you take advantage of having it. I would think most people would be better off with the ability to select the time most beneficial for them to take distributions from the non-tax Roth as well as the most beneficial time for them to take distributions from the taxable traditional TSP. It would appear to me that the best advice would be to suggest opening a Roth separate from the traditional TSP and having the full benefits of having two different retirement tools to use during the distribution phase. Your thoughts?
A: I’m not a fan of making Roth TSP contributions unless there is a clear and significant benefit to doing so. In most cases, there is no such benefit assured. If you decide to make those contributions, you are stuck with the limits imposed by the TSP, which include one blanket asset allocation to cover both types of money, and the distribution requirements that you mention. You can work around those distribution limits by rolling over some or most of your TSP balance to a Traditional IRA and a Roth IRA, and then transferring the Traditional IRA back into the TSP. As long as you don’t empty and close your TSP account, this will isolate most of your Roth money in a Roth IRA account where it can be more flexibly managed.
