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Airmen will now have the option of paying taxes on retirement savings upfront — rather than during their retirement years — through the federal Thrift Savings Plan program.
The new Roth option to the federal TSP begins Oct. 1 for the Air Force.
Now, airmen can have the money they put toward retirement deducted from their paychecks after taxes are withdrawn. When they retire, airmen will not have to pay taxes on the Roth savings — because the income was already taxed — or on any earnings those savings accrue, provided the first Roth contribution has been in the account for at least five years and the airman is at least 59½ years old or disabled.
The key factor in deciding whether to choose the Roth option is predicting whether you will be paying higher or lower taxes when withdrawing the money, officials say. The main wild card for Roth is the uncertainty of how tax rates might change between now and when you reach retirement.
"What's so elusive here is, what do you think your tax rates are going to be [in the future]?" said Ron McCray, a member of the Federal Retirement Thrift Investment Board, back in March.
Airmen can initiate paperwork, TSP-U-1 dated May 2012, to open a Roth TSP account effective Oct. 1. Initial contributions will be collected in November in accordance with current TSP rules and policies.
The first full Roth TSP deduction amount transmitted to the TSP Agency Technical Services will be Nov. 30.
The first part of the member's TSP deduction will be withheld from the November midmonth pay. For more information or questions concerning TSP, members can visit http://www.tsp.gov">www.tsp.gov, which gives a comprehensive overview of the program, both the traditional and Roth options.