Thrift Savings Plan Roth participation grows steadily

Just four months after its inception, about 40,000 federal employees, including 5,300 Marines, have opted into the Thrift Savings Plan’s Roth option, according to Federal Times.

At the end of August, about 20,000 total federal employees had invested about $13 million into the Roth plan.

The TSP Roth option, unveiled in May, allows beneficiaries to invest money that already has been taxed and cannot be taxed again upon withdrawal, unlike traditional TSP investments. With Roth’s addition, participants now can invest pretax or after-tax dollars in any of TSP’s offerings as long as their total contributions are within Internal Revenue Service’s limits. The IRS increased the cap on annual individual TSP contributions in 2012 from $16,500 to $17,000, tracking a change in the cost-of-living index. Employees 50 and older can contribute an additional $5,500 a year.

Marines, Coast Guard members, reservists and Defense Department civilians were among the first to be able to make Roth contributions this summer. Discrepancies between Army, Navy and Air Force payroll structures delayed the ability of service members to enroll until Oct. 1.

Military service members are among those most likely to benefit from the Roth option. For younger service members who receive an annual allowance of $20,000 to $25,000, a Roth plan would ensure they are taxed on those earnings in the current year, rather than on presumably higher income upon retirement.

Military reservists are among the few TSP participants still waiting for Roth availability, which is slated for late fall 2013.