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Presenters from the National Institute of Transition Planning, the federal leader in retirement planning seminars, take your calls and emails every Monday. Each week, the show focuses on a specific area of retirement planning from financial security, taxes, federal benefits and estate planning, to life after retirement and the latest rumors. Email your questions or call the show live at 202-465-3080.
Roth TSP 'on schedule' for 2012 launch
Monday - 9/26/2011, 7:40pm EDT
By Andrew Mitchell
Federal News Radio
Efforts by the Federal Retirement Thrift Investment Board to roll out a Roth TSP are on schedule, and the new plan will likely launch in the second quarter of 2012, according to the board's executive director, Greg Long.
Long and External Affairs Director Tom Trabucco joined the For Your Benefit program for an hour-long discussion on the latest information about the TSP.
The Roth plan has been in the works since 2009. It would allow federal employees to invest already taxed income so it can be withdrawn without being taxed again.
The original rollout was January 2012, however TSP officials said earlier this year it would be delayed.
Now, the plan is back on track.
"We're on schedule. We're meeting our milestones to launch that on time," he said. "However, we will reassess as we get closer to that date."
Long said a formal announcement and the exact date of the launch would likely come in the board's annual statement in February.
Rolling out the plan has been a hefty project for the board, Long added.
"It is a large project with multiple moving parts," he explained, affecting the TSP's record-keeping system, communications materials, accounting and IT.
Under the plan, as money comes in through contributions, participants will have to indicate whether they want it to go to the traditional account — which is pre-tax — or to the Roth, which is, essentially post-tax, Long said.
"So we need to track those two sources of money differently on the way in," he said. "We need to track them differently any time there is an interfund transfer, or an exchange between funds. And, very importantly, we need to track them separately on the way out."
Long, Trabucco and hosts Tammy Flanagan and Bob Leins also reminded listeners it's never too early to start saving for retirement.
Flanagan noted that she sometimes has trouble convincing younger federal employees of the need to begin saving for retirement at the very start of one's career.
Flanagan told of meeting one recent hire at a retirement seminar. "Us college graduates," Flanagan said the woman told her, "we can't participate, because we have to pay the rent and we have all these expenses and our college loans to pay off."
"I said, 'Boy, you really have to find a way. Either lower rent or consolidate the loans, because it's inevitable. You have to do it."
"When you miss it, it's hard to catch up," Leins said.
The good news, the panelists agreed, is that now young federal employees automatically become participants in the federal retirement system upon joining the government workforce.
This was one of the provisions of the Thrift Savings Plan Enhancement Act of 2009, which was signed into law by President Barack Obama.
"One of the benefits all of us have in this room," Trabucco said, "is that we were all once young, and we remember what it's like. And that's why we pushed for automatic enrollment."
Long said he foresees as much as 90 percent participation in the TSP in the coming years as a result of the law's provision.
This means, he said, "that you have several hundred thousand more federal employees participating in the TSP than would be otherwise. And that's more people who are going to be able to live in dignity in retirement," Long added.
(Jack Moore contributed to this report)