Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Which Thrift Savings Plan should I use?
"My question is I've been in the TSP for about 15 years, the Thrift Savings [Plan] for federal employees. Now I'm getting like six years away from retirement. Which of the funds [in the plan] is best for me? And then can you address the Roth IRA, is that better than a TSP?"
Gary Silverman, CFP®:
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Whenever the question comes as to investments, the answer is usually (as it is now), "It Depends." Realize that time to retirement is a relatively minor issue when it comes to investment mix. What is the issue is time to spending. Unless your plan is to spend all the money right when you retire, much of the money needs to last 5, 10, 20, and even over 30 years. That's long-term investing which calls for equities (I,S,C). However, you will be spending something, so having 6 months to 3 years of spending money in fixed income (F,G) should occur by the time you hit retirement. Of course, you may not have any need for the TSP money at retirement as your pension and other income sources may suffice.

All this is moot though, until you take into account your risk tolerance. You must figure out how much of the ups and downs of the markets you can stand and not create a portfolio that bounces more than that. The danger is selling out when the market is bottoming (and the most scary). Risk tolerance often changes at retirement and as we get older, so what you could stand 5 years ago may not be what you can stand now.

As for the Roth vs depends. Generally, if you get matching (i.e., you're not in the military) at least the portion that gets matched should be put into the TSP. After that, I'm partial to the Roth for the next $4-5,000 (depending on your age). You'd then go back to the TSP with your remaining funds. However, your unique circumstances could change those ideas.

I would suggest you contact a financial planner to get some guidance. I'm partial to a CFP (Certified Financial Planner) and one that operates on a Fee-Only basis, but I am biased there. You can find a listing of practicing planners though the Financial Planning Association (
Barbara Babcock:
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Talk to your TSP plan administrator to see what investment funds are available to you. Being just 6 years away from retirement, you will want to minimize risk but find a return that is greater than the inflation rate, so that your investment does not lose value.
Elizabeth Goldsmith:
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I'm not an expert on TSP but Roth IRAs offer many benefits to the people who qualify to invest in them (there are income limits, for example). Hard to beat a Roth IRA. Good questions, good luck!
Ellen Hoffman:
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I'm sorry to say I do not give specific investment advice. As for a Roth vs a TSP...the main difference with a Roth is that you are paying taxes on the contribution up front...and when you receive the money after you retire, you won't have to pay taxes on it. Of course there are lower limits on the amount you can contribute to a Roth, so the issue may be at least partly how much money you have available to put into retirement accounts in a given year.
Alyssa Rakovich:
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Thrift savings plans have limited options - the closer you are toward retirement the less risk you should take - I would be meeting with an investment professional to discuss your retirement strategies - The only reason most of us save is so that we will have a pile of money that we can turn into income later in life when we want to stop working - Not knowing your complete history - where your money currently is invested - how much you have - how much you are saving - how much you need it to provide you when you retire - these are questions you need to have answered - A Roth IRA is a nice supplement to a TSP because you are putting after tax $ away and when you need to take the money out you don't have to pay any taxes - however, the greatest benefit of a Roth is the amount of years it can be funded before having to take distributions of income - you contribute after tax dollars to the Roth the Roth grows tax defered and the money comes out tax free - if the money doesn't have a lot of time to grow tax deferred than you don't get the true benefit of the Roth - The longer the time horizon the better the Roth is as an option - The Roth also give your lots of investment flexibility unlike the TSP - however the TSP is pre tax money so you get the benefit of putting more money to work for example if you put $100 pre tax and your tax bracket is 20% - then you put $100 in the TSP it is $80 - but to put $100 in a Roth you have to put after tax dollars.
Elizabeth Rusnak:
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I recommend talking to financial planner who can review the different funds you have available for your TSP investment. How you invest depends on your individual personal situation. You may be suitable for higher risk investments, or you may be suitable for more moderate to lower risk investments. It really depends on your personal situation. Roth IRAs are good if your tax rate is low right now (compared to what it will be when you retire). With Roth IRAs, you are paying the tax now (since your investment is after-tax), and then when you're eligible to start drawing from the account, you don't pay tax again.
Jeff Kyle:
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There’s no way to responsibly answer this question without doing a thorough fact finder & analysis to determine what else you have in place, what are your goals, what is your risk tolerance & time horizon etc. Also, without being able to see the funds in the plan, there’s no way for me to know what your options are within the plan. Keeping your money within the TSP may not be the best option. I generally advise my clients to take control of their monies, rather than allowing the monies to sit with the “TSP or other type of 401(k) plan.

Lastly, The Roth IRA question is a bit ambiguous. Better in what way? They are completely different ways for saving. A TSP is pre-tax dollars, compounds tax-deferred and when you spend (forced to at age 70 ½) becomes 100% taxable. A Roth is after-tax dollars, compounds tax-deferred and as long as you don’t touch the monies prior to 59 ½, it can come out tax-free. There are additional guidelines for this. There are more guidelines to this. SO, without doing a thorough insurance, financial, tax & estate plan analysis, it’s not really possible to answer the questions posed.