Should I Withdraw From My Roth TSP Or Traditional TSP First?

Think it’s time to start withdrawing from your Thrift Savings Plan (TSP)? Hold on, you want to make sure you’re doing it right! Taking without thinking can result in irreversible loss, and we’re here to help you avoid that. Find out whether you should withdraw from your Roth TSP or traditional TSP first so you can plan ahead and do it smartly. The Federal Educator’s Thrift Savings Plan overview can help you learn more about your retirement benefits so you can get the most out of your hard-earned savings!

Roth, Traditional, Why Does It Matter?

Like most IRAs, the main difference between a Roth TSP and a traditional TSP is that the former grows tax-free while the latter is subject to tax at the time of withdrawal. As your federal benefits experts, we’ll tell you why this difference is critical to your retirement plan in just a moment. First, it is critical to understand the importance of proper tax planning by seeing a professional before making any rash decisions.

Know the Possible Consequences

Many successful retirement savings accounts are reliant on a constant growth of savings over time. Making even one small withdrawal without a solid strategy can undo years of work. Oftentimes, this is a mistake that can’t be fixed without some sort of repercussion. Reading this guide is the first step in avoiding actions that can set back your retirement plan.

Consider Roth IRA Conversions The TSP has proven to be a reliable means of retirement savings for many federal employees. However, everyone has a different income and needs, and they have different expenses. Before continuing with your TSP withdrawal strategy, you may be better off rolling over your savings into an IRA instead for greater tax benefits.

Strategic Tax Planning: Pull From Your Traditional TSP First

If you have both a Roth TSP and a traditional TSP, it may be in your best interest to withdraw from your traditional TSP first. Since Roth TSPs grow tax-free, you can get more back by letting that account compound over time. Meanwhile, traditional TSPs are subject to tax at the time of withdrawal. If you haven’t noticed, tax rates tend to only get higher with inflation. The longer you wait to pull, the more you may have to pay in taxes. Better to get your savings out sooner rather than wait until later when you might be paying more.

Manage Your RMDs

Another thing to note is that Roth TSPs are not subject to required minimum distributions (RMDs). This means that you can keep up your savings without the obligation of pulling from them when you don’t want to. Traditional TSPs, on the other hand, will have you taking RMDs around the age of 70.

The Benefits of Preserving Your Roth TSP

Let’s take a moment to review all of the reasons why it may be better for you to pull from your Roth TSP before your traditional TSP:

• Grow Your Roth TSP Tax-Free: Keep any amount that you earn over time without worrying about paying substantial taxes later.
• Combat Projected Higher Tax Rates: Lower the amount you’ll have to pay in taxes over time.
• Prepare For An Inherited TSP: Nourish tax-efficient savings for your potential beneficiaries in case they will be inherited later.

Learn more > 2025 TSP Comparison: Roth vs Traditional For Federal Employees

Manage Your Thrift Savings Plan With Federal Educators

Be smart with your Thrift Savings Plan and reach out to Federal Educators today! We will teach you how to manage your retirement savings plan for the best possible outcome and a more comfortable retirement.