Taxes — now or later


Q. I have been investing in the traditional TSP during my entire career. I have approximately $585,000 in my account and plan to retire at 62 years old in 5 years from now. I’m contemplating changing my investments from the traditional to the Roth in order to lessen the tax burden later on in retirement when required minimum distributions kick in. My wife is self-employed and has been funding a Roth annually for the past 10 years. I began funding a Roth last year and we both plan to continue to fund a Roth for the next 5 years. Do you think this move to the Roth TSP has merit?

A. You are simply deciding to pay tax now, rather than later, and there is no inherent advantage to this choice. It will have merit if the taxes you pay on the withdrawals are less than the taxes you will pay on the income used to fund the contributions when it is received. You are making a bet that your tax burden will drop significantly in the future — that the “bird in the bush” will be worth more than the “bird in hand.”


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

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