In April or May, the TSP (military's 401k equivalent) is going to start offering a Roth option -- very exciting.
Anyway, I've been trying to figure out the best way to split my retirement savings between the Traditional TSP (tax deferred) and Roth TSP ... or if it's even beneficial to split it at all. This year, I expect I'll be just shy of the line between the 15% / 25% marginal tax brackets, and next year, I'll likely be just above it.
I love my Roth IRA, and I'm really glad to be getting this Roth TSP option. But what do you guys think? Is it best to contribute somewhat to my deferred TSP in order to try to stay below the 25% bracket? In the long view, I see most of my retirement income coming from my Roth accounts, so the taxes I'd pay on the tax-deferred assets would be low. An unknown factor is that if I stay in long enough to retire (I hope to), I'll have a pension that would significantly raise my taxable income. And, of course, unknown future tax rates.
I'm considering 2 options right now... either 100% Roth, or 75% Roth/25% deferred. I max my Roth IRA, but no matter how I split anything, I can't max my TSP... At best, I can only fund it half-way (~$8500/yr). Also of note, there is no match on my TSP contributions.
Bottom line, I guess this is about tax diversification.... what do you guys see as a smart dividing line?

Anyway, I've been trying to figure out the best way to split my retirement savings between the Traditional TSP (tax deferred) and Roth TSP ... or if it's even beneficial to split it at all. This year, I expect I'll be just shy of the line between the 15% / 25% marginal tax brackets, and next year, I'll likely be just above it.
I love my Roth IRA, and I'm really glad to be getting this Roth TSP option. But what do you guys think? Is it best to contribute somewhat to my deferred TSP in order to try to stay below the 25% bracket? In the long view, I see most of my retirement income coming from my Roth accounts, so the taxes I'd pay on the tax-deferred assets would be low. An unknown factor is that if I stay in long enough to retire (I hope to), I'll have a pension that would significantly raise my taxable income. And, of course, unknown future tax rates.
I'm considering 2 options right now... either 100% Roth, or 75% Roth/25% deferred. I max my Roth IRA, but no matter how I split anything, I can't max my TSP... At best, I can only fund it half-way (~$8500/yr). Also of note, there is no match on my TSP contributions.
Bottom line, I guess this is about tax diversification.... what do you guys see as a smart dividing line?
Comment