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Shows & Panels
Retirement board sees spike in Roth TSP enrollment
Thursday - 7/31/2014, 2:23pm EDT
The board discussed the numbers during its monthly meeting Monday. According to Thrift Savings Fund statistics, Roth accounts total more than $1.5 billion as of June 2014.
Kim Weaver, director of external affairs at FRTIB, told In Depth with Francis Rose that the board was pleasantly surprised by the Roth TSP enrollment.
"We had internally thought that it would take longer to get there, because we know in the private sector, the Roth TSP usage is roughly 8 to 12 percent of their participant base," Weaver said. "It means that the message is out there, people are educated."
The Roth option allows employees to contribute after-tax dollars toward their retirement savings accounts. This differs from the traditional TSP, in which feds invest tax-deferred dollars, and the money is not taxed until it's withdrawn.
Employees can choose to invest in the traditional TSP, the Roth option or a combination of the two.
"The benefit to the military was one of the primary drivers of us pursuing the Roth TSP option," Weaver said.
Because service members pay little to no federal income tax, Weaver said the traditional TSP option is less advantageous to them. The Roth option is more attractive, because young members of the military can add their after-tax dollars into their account, and it won't be taxed again when they withdraw after age 59 1/2.
In June, nearly 200,000 armed service members contributed to the Roth TSP.
"We're quite pleased that overall the uptake has been high, and the uptake in the uniformed services has been what we hoped it would be," Weaver said.