Military and government officials have been discussing adding a Roth Option for the TSP to try and bring the Thrift Savings Plan more in line with its civilian counterpart – the 401(k) plan. The benefit of offering a Roth TSP option is that Roth contributions are made with post tax salary, and withdrawals are tax free in retirement. This allows money invested in a Roth account to grow without the drag of taxes until the account holder reaches retirement age – potentially several decades.
Roth TSP plan may be several years off
The House recently approved a measure that will make the Roth TSP a reality for military and government Thrift Savings Plan holders, but it appears as though it may still take a couple years to toll the Roth TSP plan out to participating members, even if a bill is signed into law. The reason for the delay is that it will take TSP officials, military pay officials, and other federal agencies time to make the necessary changes in the payroll and accounting systems.
Additionally, a change such as adding a Roth option is a substantial enough change that the TSP Board will want to ensure that people are informed about the Roth option and will need to offer enough information to TSP participants to make sure they can make an informed decision regarding whether or not the Roth option would be better for them, or whether they should stick with the traditional offering.
Which is better – Roth or Traditional? The Roth and Traditional TSP plans would function in a similar manner as Roth and Traditional IRAs. I recommend reading on the pros and cons of investing in the IRAs to get a better idea of how it would differ with the TSP. Both options are good, but one may be better for you than the other, depending on your current and potential future income, and your current and potential future tax levels. You should make your decision based on those and other factors.