The Contribution comparison calculator helps you assess how the tax treatment choice you make for your employee contributions affects your paycheck. With Roth TSP contributions, you make contributions with after-tax income by paying taxes up front. During retirement, you receive qualified Roth distributions tax-free. The traditional TSP lets you make contributions before taxes are taken out of your income and then pay taxes on withdrawals.
This calculator provides a side-by-side comparison of traditional and Roth contributions to help you assess whether Roth TSP might be right for you. Keep in mind you may choose to contribute all, some, or none of your contributions to the Roth TSP. If contributing to both Roth and traditional balances within your TSP account, your combined contributions cannot exceed the elective deferral limit (or catch-up limit if you are turning age 50 or older in the calendar year). This calculator does not account for tax-free contributions.
Note that the calculator results are based on the limited information captured. You should consult a qualified tax or financial advisor to further assess your individual situation.
If you plan to retire before age 59½, be aware that any Roth earnings included in a withdrawal will not be tax-free. Also, you may be subject to a 10% early withdrawal penalty tax. See the TSP tax notice Important Information About Payments From Your TSP Account for more information as well as exceptions to this rule.
Participants turning age 50 or older are eligible for catch-up contributions. We’ll take that into account when calculating how much you can contribute.
A recommended estimation is age 95 minus your retirement age to plan
for your income needs and protect your longevity risk.
Enter the annual rate of return you expect to earn on your contributions. View the Rates of return for context, but keep in mind that past performance is not a guarantee or a predictor of future returns.
The total of your regular employee contributions should not exceed the Internal Revenue Code (IRC)
elective deferral and catch-up contribution limits
( for ).
Your current selections are -- annually.
This will depend on how often you are paid (biweekly or monthly, for example). If you are uncertain, check with your personnel or finance office.
Payment Frequency
Number of Salary Payments
Biweekly
26*
Monthly
12
Weekly
52
Semimonthly
24
*A biweekly frequency occasionally results in 27 salary payments for a year. Contact your personnel or payroll office if you do not know the number of salary payments you will receive for the remainder of the year.
Checking this box reduces the contribution percentage to the Roth balance, so that after paying taxes, your paycheck will be the same as it would be after a contribution to your traditional TSP balance. If you do not check this box, the same contribution percentage will be used for Roth and traditional contributions.
You have chosen to keep the impact on your paycheck equal; therefore, your Roth TSP contribution percentage and contribution amount will be lower than a traditional TSP contribution. The downward adjustment to the Roth contribution is necessary to account for the income taxes that you pay up front instead of in the future.
You have not checked the option to minimize the impact Roth contributions have on your paycheck. Therefore, the impact (deduction) on your paycheck will be greater when making Roth TSP contributions because your take-home pay will be reduced by both the contribution and the taxes on your contribution.
Additionally, Roth TSP contributions will not reduce your adjusted gross income (AGI) the way that traditional contributions will. A higher AGI means you may lose out on certain tax advantages.
You have chosen to keep the impact on your paycheck equal; therefore, your gross (pre-tax) traditional balance will be higher because the higher contribution percentage allows you to put aside a higher dollar amount and potentially receive a greater return through earnings.
The higher traditional balance may be offset, however, by any income tax you pay on it when you make a withdrawal. The Roth TSP balance, on the other hand, will be tax-free in retirement (provided you meet IRS requirements) because you paid the taxes on those contributions when you made them during your career.
You have chosen the same contribution percentage for Roth and traditional contributions; therefore, the Roth and traditional retirement balances will be the same. Keep in mind that your traditional TSP balance will be subject to income tax when you withdraw it, but withdrawals from your Roth balance will be tax-free provided you meet the IRS requirements.
The benefit of having a tax-free Roth TSP balance in retirement, however, must be weighed against the rate at which those contributions were taxed during your working years and any tax benefits you may have lost out on due to your higher AGI.
Predicting your tax bracket in retirement is the key to determining if Roth TSP or traditional TSP contributions are the right choice for you now.
This net (after-tax) annual income comparison provides a more accurate reflection of whether you might benefit from paying taxes up front (Roth TSP) or when you withdraw your money (traditional TSP).
Keep in mind that while a Roth TSP annual income stream may be higher when you withdraw your money, the benefit must be weighed against the rate at which those contributions were taxed during your working years and any tax benefits you may have lost out on due to your higher AGI.
It all comes down to what tax bracket you are in now and which one you think you may fall in while in retirement. Therefore, you may wish to consult a tax advisor to assist you with your retirement planning and contribution decisions.
DISCLAIMER: This calculator is provided for informational purposes only. It is not intended
to be used as an investment advisory tool or as a guarantee of the duration of the elected
installment payment amount.
