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Investor Bulletin: Roth TSP for Uniformed Services Members

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to help educate uniformed services members about the Roth Thrift Savings Plan.

What is the TSP?

The Thrift Savings Plan (TSP) is a federal government-sponsored retirement savings and investment plan.  It offers the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans.  Like a 401(k) plan, the TSP is a defined contribution plan, meaning that the employer (in this case the Department of Defense (DoD)), employee (uniformed services member), or both can make regular contributions into the plan.  (Currently, the DoD does not make contributions to uniformed services members’ TSP accounts).  The employer makes no guarantees as to future account value, benefits, or income from the plan.  The ultimate account value and benefits derived from the plan are based solely on the amounts contributed, expenses, and any gains and losses in the underlying investments.  Unlike the Uniformed Services Retirement System, which is based on years of service and the rank held at the time of retirement, the TSP account is portable, meaning that the account holder retains ownership whether or not he or she separates from the uniformed services prior to being eligible for retirement. 

The TSP offers two account options, Roth and traditional.

What is the Roth TSP and how does it compare to the traditional TSP?

The Roth TSP, introduced in 2012, allows you to contribute after tax income to the TSP.  This allows the withdrawal of tax-free savings during retirement.  The traditional TSP allows you to contribute income from your paycheck before it is adjusted for taxes.  Therefore, no federal taxes are paid on current contributions to the traditional TSP.   However, you will pay taxes on your traditional TSP contributions and earnings when you withdraw the funds in retirement.

There is another difference regarding taxes on a Roth TSP and traditional TSP unique to uniformed services members.  Uniformed services members who make contributions to their Roth TSP from tax-exempt combat zone pay never have to pay taxes on those contributions or the investment earnings from those contributions if the withdrawals are qualified.  Uniformed services members who make contributions of tax-exempt combat zone pay into a traditional TSP also will not have to pay taxes on such contributions but they will have to pay taxes on the earnings of those contributions upon retirement.  Social Security taxes are paid on both Roth TSP contributions and traditional TSP contributions. 

Earnings on Roth TSP contributions are tax-free when a qualified withdrawal is made.  To make a qualified withdrawal, the withdrawal must be made at least five years after the start of the year in which you made your first Roth TSP contribution and you must be at least age 59½, permanently disabled or deceased.

How do I decide whether the Roth TSP or the traditional TSP option is right for me?

Electing to participate in the Roth TSP does not preclude you from contributing to a traditional TSP account.  You can contribute to both account types as long as the total Roth TSP and traditional TSP contributions don’t exceed the annual contribution limit established by the Internal Revenue Code (IRC). 

When deciding whether to contribute to a Roth TSP or traditional TSP account, or a combination of both, it might be helpful to consider comparative tax rates now versus at retirement age.  If you’re in a low tax bracket currently but think you’ll be in a higher tax bracket once you reach retirement age, choosing the Roth TSP option could be to your benefit because your withdrawals won’t be taxed at your higher retirement age tax rate.  

Information on the TSP’s website can help you assess whether the Roth TSP or the traditional TSP is right for you.

How much can I contribute to my Roth TSP?

For 2015, the IRC contribution limit is $18,000.  You may elect to contribute any percentage (one to 100) of your basic pay to the TSP.  However, your annual dollar total cannot exceed the IRC limit.  If you contribute to the TSP from your basic pay, you may also contribute from one to 100 percent of any incentive pay or special pay (including bonus pay) you receive, up to the IRC contribution limit.  In addition to that amount, “catch-up contributions” of up to $6,000 for 2015 may be made by eligible participants (those age 50 or older or turning 50 that year).  Keep in mind that you cannot make “catch-up contributions” to your traditional TSP from combat zone pay.

Whether you contribute to a Roth or traditional TSP or choose to do both, your combined contribution cannot exceed the IRC contribution limit and, if eligible, the catch-up contribution limit.  If you exceed the contribution limit in a given year and contribute to both a Roth TSP and traditional TSP, the TSP will return the excess contributions and earnings in proportion to your contributions to Roth TSP and traditional TSP. 

Pay deductions from tax-exempt pay earned in a combat zone for traditional TSP contributions do not count against the IRC contribution limit ($18,000 for 2015) but cannot exceed the traditional TSP tax-exempt contribution limit established by the IRC.  The 2015 traditional TSP tax-exempt contribution limit is $53,000.  However, Roth TSP contributions using combat zone pay are capped at the IRC contribution limit.

You should check the IRC contribution limits every year to confirm the contribution limits set by the IRC as they are subject to change each year.

How do I sign up for the Roth TSP option?

Participating in the TSP requires submitting a contribution election to your uniformed service’s payroll office letting them know what portion of your retirement savings you would like to designate to the Roth and/or traditional TSP options. 

Can I transfer savings between the Roth TSP and the traditional TSP funds?

No.  The Roth TSP and traditional TSP can be thought of as two separate “buckets.”  Whatever percentage of contributions is designated to the Roth TSP is taxed before it is saved so the savings cannot be switched between the two buckets once the designation has been made.  You can adjust what percentages will be contributed to each bucket in the future, though.

Can I transfer retirement savings between the Roth TSP and a private retirement account, such as a Roth 401(k)?

Yes, but there are some restrictions.  The Roth TSP accepts transfers from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s.  Roth TSP will not accept transfers or rollovers from Roth IRAs.  However, many Roth IRAs may accept transfers from Roth TSP accounts.

Can I take out loans against my Roth TSP savings? Can I make In-Service Withdrawals from these savings?

Yes, but there are a few limitations, just as there are for a traditional TSP.  Loans can be for a general purpose or for the purchase/construction of a primary residence.  In-service withdrawals can be for financial hardship or can be age-based.  Making a financial hardship withdrawal requires a certification of financial hardship resulting from a recurring negative cash flow, legal expenses for separation or divorce, medical expenses, or a personal casualty loss.  An age-based in-service withdrawal can be made any time after you reach the age of 59½, but this can only be done one time before separation from service.

Once I am retired, how do Roth TSP withdrawals work? Can I choose whether I withdraw from my traditional or Roth TSP savings first?

After retirement or after separating from uniformed services, Roth TSP savings work just like traditional TSP savings.  When you make a withdrawal, you will receive proportional amounts of Roth TSP and traditional TSP money if you contributed to both.  With any TSP account, you can elect to receive either a partial or full withdrawal.  A full withdrawal can be made as a single payment, TSP monthly payments, or a lifetime annuity purchased for you by TSP.

How do death benefits work for the Roth TSP?

Distribution of death benefits is no different for Roth TSP versus traditional TSP savings.  In the event of death, your TSP account will be distributed to the beneficiaries previously named. If no beneficiaries have been named, the savings will be distributed in the order of precedence required by law (spouse, children, etc.).  

What happens to my Roth TSP retirement savings if I leave the uniformed services for the private sector or transfer to a federal agency?   

If you leave uniformed services for the private sector, your TSP savings, both Roth and traditional, will remain in your TSP account, and can continue to grow.  However, you won’t be able to contribute new money.  You can then make qualified withdrawals after the standard age/time requirements are fulfilled.  TSP savings can also be transferred into a private retirement account, according to the transfer guidelines previously addressed.

When transferring to another branch of the uniformed services or transitioning to a federal agency, TSP savings should be unaffected and both traditional and Roth TSP contributions can continue to be made.  If you are appointed to a federal civilian position after leaving the uniformed services, however, your new agency will automatically enroll you in the TSP and open a separate civilian TSP account for you.  You will then get to decide whether you want to keep your uniformed services TSP account open and growing, or have it combined with your new civilian TSP account.

So, overall, how does TSP, including the Roth option, benefit me as an investor?

The TSP has a selection of individual funds that offer broad market diversification and risk levels.  You can choose to have your retirement dollars invested in everything from short-term U.S. Treasuries to index funds comprised of domestic or international stocks.  If you are uncertain how to invest your funds, you can select lifecycle funds which use professionally determined investment mixes based on various time horizons. 

The TSP not only offers access to a broad array of investment choices, it is the least expensive investment vehicle of its type in the country.  Information on TSP fees and expenses is available on the TSP website.  For more information on fees generally, visit

Ask Questions

Investors are encouraged to review the SEC publication “Ask Questions” and other SEC publications located at before making any investment.

If you are thinking about investing and have any questions, do not hesitate to call the SEC's Office of Investor Education and Advocacy at 1-800-732-0330 or ask a question using this online form

Additional Resources

For additional investor education information, see the SEC’s website for individual investors,

For the TSP webpage maintained by the Federal Retirement Thrift Investment Board, see

For the TSP Calculators, see

For the Uniformed Services MyPay website, see

For the Office of the Secretary of Defense, Military Compensation website, see

For general information about saving and investing, see Saving and Investing: a Roadmap to Your Financial Security through Saving and Investing.  This publication is also available in Spanish.

For a list of questions you should ask when considering an investment, see Ask Questions: Questions You Should Ask about Your Investments.  This publication is also available in Spanish.

The Office of Investor Education and Advocacy has provided this information as a service to investors.  It is neither a legal interpretation nor a statement of SEC policy.  If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law.

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