Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
House committee OK’s Roth option for TSP
Old 03-18-2009, 08:20 PM   #1
Recycles dryer sheets
 
Join Date: May 2008
Posts: 119
House committee OK’s Roth option for TSP

The House Oversight and Government Reform Committee approved legislation Wednesday that would create a Roth option for the TSP, which experts say would be a boon to service members who participate in the program.

Under a Roth option, participants would pay taxes when they make contributions to their TSP retirement investment accounts. When they retire and withdraw those funds, they would not be taxed. That differs from the current tax-deferred TSP plan, where contributions are taxed at the time of withdrawal.

The Federal Retirement Thrift Investment Board, which oversees the TSP program, said service members are most likely to benefit from a Roth option, since their current tax rates are likely to be lower than future tax rates. Civilian employees usually will pay lower taxes in the future, which the board says makes a Roth option less beneficial for them.

The legislation also would automatically enroll new federal civilian employees — but not new service members — in the Thrift Savings Plan.
Title IV of HR 1256, the Family Smoking Prevention and Tobacco Control Act, originally would have automatically enrolled new service members in TSP. But an amendment attached to the bill by Rep. Darrell Issa, R-Calif., would leave it to the Pentagon to decide if troops should be automatically enrolled.

Issa said it might not be fair to include service members since the Defense Department does not match their TSP contributions. Civilians under the Federal Employees Retirement System receive matching contributions from their agencies.

The bill would automatically enroll new civilian employees in the government securities-backed G Fund, which does not decline in value and is widely viewed as the safest TSP fund. The bill recommends automatically enrolled employees invest 3 percent of their paychecks in TSP, though it allows the board that oversees the program to set the default percentage anywhere between 2 percent and 5 percent.

Another approved Issa amendment would require the Pentagon to study how much matching service members’ TSP contributions would cost and whether it would help recruitment and retention. Issa said the time has come to give service members matching TSP contributions, though it could cost billions of dollars.

“Our men and women in uniform are treated disproportionately and poorly when it comes to TSP,” Issa said.

Rep. Edolphus Towns, D-N.Y., the committee chairman, agreed.

“We should provide top-notch retirement benefits to our uniformed military personnel,” Towns said.
__________________

__________________
Boxkicker is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-19-2009, 07:49 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,649
I like opt out on savings. I wish I had been auto enrolled in some sort of investment program 40 years ago. It is particularly valuable for twenty somethings -- many (most?) of them don't realize the implications of compound interest. Many people spend their entire income - I did until I was about 32. If they start out not saving, they will quickly conclude that they can't afford to save. If the default employment contract includes auto savings, many of these same people will be too lazy/inattentive to fill out the paperwork to drop out. So they will keep saving. It is paternalistic, yes. But it doesn't harm anyone and it helps a significant number of slackers (like me) who wouldn't figure it out on their own.

As for the military, I don't see any reason why an opt out program wouldn't be as useful for them as for civilians. If their benefits suck, raise them.
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 03-19-2009, 12:12 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,532
I like the auto-enrollment/opt out programs too. It makes perfect sense if you think of the 401k as the replacement for the traditional pension. You automatically put 6-9% of your pay into the 401k (unless you opt out) plus the company match of 4-6%. 40 years of that and you'll be set. Maybe.
__________________
FUEGO is offline   Reply With Quote
Old 03-19-2009, 12:55 PM   #4
Recycles dryer sheets
 
Join Date: May 2008
Posts: 119
I wouldn't say the benefits for the military suck that bad. I retired in Dec 2008 as an E-7. My retirement is $1880/mo. My medical is $230/yr with $12 co-pays if I don't get seen in a MTF. My dental is $31/mo.

I recommended all my Sailors that I ran across to put some in the TSP. It is a nice thing to have in addition to a military pension when you get over 59 1/2. A Roth option would be nice for those still serving!
__________________
Boxkicker is offline   Reply With Quote
Old 03-19-2009, 01:00 PM   #5
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by Boxkicker View Post
I wouldn't say the benefits for the military suck that bad.
I'd say. How many other people can collect pension checks before their 40th birthday?
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-19-2009, 01:03 PM   #6
Recycles dryer sheets
 
Join Date: May 2008
Posts: 119
Oh, forgot to add..It's COLA'd
__________________
Boxkicker is offline   Reply With Quote
Old 03-19-2009, 01:14 PM   #7
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by Boxkicker View Post
Oh, forgot to add..It's COLA'd
OW! What's that?

Oh, it's the salt being rubbed into my wounds.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-19-2009, 01:17 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
Quote:
Originally Posted by ziggy29 View Post
I'd say. How many other people can collect pension checks before their 40th birthday?
Guess you got to give them something for risking their lives
__________________
Notmuchlonger is offline   Reply With Quote
Old 03-19-2009, 01:19 PM   #9
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by Notmuchlonger View Post
Guess you got to give them something for risking their lives
No problem with that. Just saying it's pretty hard for someone to argue that they have lousy benefits when they have that waiting on the other side.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-19-2009, 01:23 PM   #10
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
I have a few old friends now residing in Arlington, VA that may disagree with some of these comments. I am not sure tho as they are not speaking too much. Besides, would not the money going into the "new ROTH option" be their own money?
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 03-19-2009, 01:35 PM   #11
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by OAG View Post
I have a few old friends now residing in Arlington, VA that may disagree with some of these comments. I am not sure tho as they are not speaking too much. Besides, would not the money going into the "new ROTH option" be their own money?
Seems like they should have the Roth option like everyone else. That means they too could be screwed when the government switches to a national sales tax take everything out tax-free in the future and avoid RMDs.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-19-2009, 06:48 PM   #12
Dryer sheet aficionado
 
Join Date: May 2007
Posts: 31
Any idea if I can roll over my current balance into the proposed new Roth TSP (and pay the taxes)? I haven't seen that question asked yet.
__________________
DoubleDown is offline   Reply With Quote
Old 03-19-2009, 06:56 PM   #13
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,631
I'm excited about this. I hope it gets implemented. I have a Roth thru Vanguard, but only putting in $50 a month. I think it will be much easier to just do it thru the TSP.

Yeah, I know its all my money and I could just set up a seperate allotment with auto deposit thru my paycheck. Just can't seem to get around to it...
__________________
Bimmerbill is offline   Reply With Quote
Old 03-19-2009, 08:41 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Nov 2007
Posts: 7,532
Quote:
Originally Posted by Bimmerbill View Post
Yeah, I know its all my money and I could just set up a seperate allotment with auto deposit thru my paycheck. Just can't seem to get around to it...
It's relatively easy w/ vanguard. Except I think it is $100 per transaction minimum, so you'd have to do bi-monthlies to put in $50/month.

I do the auto-purchase at vanguard and it is just another bill now to me. Easy. And it forces me to invest.
__________________
FUEGO is offline   Reply With Quote
Old 03-19-2009, 10:35 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,440
Quote:
Originally Posted by ziggy29 View Post
Seems like they should have the Roth option like everyone else. That means they too could be screwed when the government switches to a national sales tax take everything out tax-free in the future and avoid RMDs.
The government won't be switching to a national sales tax.

They'll be adding one.
__________________

__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
The Three Stooges appear before the senate banking committee---wooowooowoo cashflo2u2 FIRE and Money 64 11-22-2008 11:08 AM
Invest in TSP or Roth IRA first? Keyboard Ninja Young Dreamers 4 10-22-2008 05:40 PM
CSI - Committee for Skeptical Inquiry dex Other topics 6 04-29-2008 09:27 AM
Suggestion: Detailed data for 95% rule option and Bernicke option. Sam FIRECalc support 2 03-25-2007 08:16 AM
Roth TSP? PsyopRanger FIRE and Money 1 08-05-2006 12:13 PM

 

 
All times are GMT -6. The time now is 05:38 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.