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Author: gastrolith Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121438  
Subject: TSP v. Roth questions Date: 12/11/2005 11:55 AM
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Greetings and Happy Holidays,

I am contemplating the removal of contribution limits for Uniformed TSP contributions. My TSP contribution is not matched (I'm active Army). Does it make more sense to contribute max the IRS allows to the TSP or max my Roth IRA and put what balance I can afford into the TSP. I cannot max both.

The other question I have is, if I get deployed and all my income is non-taxable, am I allowed to contribute to a Roth if I make NO or very limited taxable income in 2006? Maybe I won't get deployed until Mid to Late January 2006 - if that affects your reply.

Thanks for your help,
Gastrolith
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81869 of 121438
Subject: Re: TSP v. Roth questions Date: 12/11/2005 12:57 PM
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I am contemplating the removal of contribution limits for Uniformed TSP contributions. My TSP contribution is not matched (I'm active Army). Does it make more sense to contribute max the IRS allows to the TSP or max my Roth IRA and put what balance I can afford into the TSP. I cannot max both.

Since matching isn't an issue, I would max the Roth before doing anything else, with the balance to TSP.

The other question I have is, if I get deployed and all my income is non-taxable, am I allowed to contribute to a Roth if I make NO or very limited taxable income in 2006? Maybe I won't get deployed until Mid to Late January 2006 - if that affects your reply.

I think there is something pending in Congress to deal with this, but I'm not sure. It would allow people in your situation to make IRA contributions even without taxable compensation. I would think someone who handles legal affairs at your installation would have the latest on this.

Thanks for your help,

and thank you for your service.

Phil


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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81877 of 121438
Subject: Re: TSP v. Roth questions Date: 12/11/2005 11:20 PM
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if I get deployed and all my income is non-taxable

Well, when I was deployed (Navy) my income was taxed and I could not figure out how to escape it!!! It was not considered foreign income and so did not fall under the exclusion. Dang the bad luck.

But-
Unless you know your tax situation when you are retired and are drawing out the money, I would equally contribute to TSP and Roth! There are advantages, or hedges, in both and which is better will only be know down the road. IF you have a good idea about your tax bracket and what Congress will do between now and then, you can adjust which you contribute first. But, in the unknown - equal.

Here is the publication for last year 2004. Not sure where the new one is. But maybe some one in CC or JAG can get you up to date.

http://www.irs.gov/pub/irs-pdf/p3.pdf

DrTarr
Also - thank you!

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81880 of 121438
Subject: Re: TSP v. Roth questions Date: 12/11/2005 11:41 PM
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if I get deployed and all my income is non-taxable

Well, when I was deployed (Navy) my income was taxed and I could not figure out how to escape it!!! It was not considered foreign income and so did not fall under the exclusion. Dang the bad luck.


I think what OP is referring to is exclusion of combat zone pay. And I expect that most who are currently stationed in a combat zone would be happy to have the bad luck of being stationed elsewhere and having thier income fully taxable...

Lorenzo

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