Roth TSP vs Traditional TSP: Which Saves You More After Tax?
Example: Annual TSP contribution (your dollars): 10000 $ · Current marginal federal tax rate: 22 % · Expected tax rate in retirement: 22 % · Years until retirement: 18 yrs · Expected annual TSP growth rate: 7 %/yr · Years you expect to draw from TSP: 25 yrs
| Roth TSP tax-free balance at retirement | $283,756 |
| Traditional TSP after-tax balance | $283,756 |
| Roth tax-free advantage | $-0 |
| Estimated annual Roth income | $11,350 |
| Estimated annual Traditional income (after tax) | $11,350 |
Worked example
Contributing $10,000 per year for 18 years at 7% growth: Traditional TSP builds to about $338,000 pre-tax; at a 22% retirement rate that is $264,000 after tax. Roth TSP builds to $263,000 after-tax today (you paid tax before contributing) — nearly identical when rates are equal. But if your retirement rate rises to 28%, Traditional delivers only $243,000 after tax vs the Roth's $263,000: a $20,000 advantage for Roth. Military members early in their careers often face lower rates now than they will in retirement — making Roth TSP the structurally superior default.
Frequently asked questions
Is military basic pay taxed?
Yes. Basic pay is subject to federal and (usually) state income tax, FICA, and Medicare. However, pay earned in a Combat Zone Tax Exclusion area is fully excluded from federal tax — making Roth TSP contributions during deployment uniquely powerful since you pay zero tax on those dollars.
Can I contribute to both Roth and Traditional TSP?
Yes. You can split your contributions between Roth and Traditional in any proportion, as long as total contributions do not exceed the annual IRS limit ($23,500 in 2025). This is a common strategy to hedge against future tax rate uncertainty.
Does the TSP employer match go into Roth or Traditional?
All government matching and automatic contributions go into the Traditional (pre-tax) side of your TSP account, regardless of whether you contribute Roth. This means even full Roth contributors will have some Traditional TSP at retirement.
What are the TSP Roth withdrawal rules?
Roth TSP withdrawals are tax- and penalty-free if you are at least 59½ AND the account has been open for at least five years. Distributions during the five-year period or before age 59½ may be subject to tax and a 10% penalty on earnings (not principal).