The Internal Revenue Service allows tax deductions for money contributed to Individual Retirement Accounts, IRAs. The IRS sets limits on the yearly amount you can contribute to IRAs, but not on the number of accounts or financial institutions in which you set them up. A Roth IRA is one of four types. The Thrift Savings Plan, TSP, is a financial institution for federal employees that offers Roth IRAs.
Of the four types of IRAs, two are for employees and two are for self-employed persons and small businesses. Employees may choose Traditional or Roth IRAs or a combination of both, the difference being when they can take a tax deduction. Self-employed persons and small businesses choose between SEP and Simple IRAs, which give them tax advantages similar to those given to large companies. With any IRA, you must wait until retirement age to withdraw money without paying a penalty. Limits to the amount you can contribute may change as time goes by.
With a Roth IRA, you don't get a tax deduction for the year you make a contribution. But when you retire, any money that you draw out is not taxable. This plan is best if you anticipate continuing to earn money that will contribute to your taxable income when you retire, or if you want to get a large lump sum. With Traditional, SEP and Simple IRAs, you get the tax deduction in the year you make the contribution, but it adds to your taxable income when you withdraw it. The IRS allows you to have more than one IRA.
According to the TSP Purpose and History statement on their website, it "was established by Congress in the Federal Employees' Retirement System Act of 1986" to offer savings and tax benefits similar to those of private corporations. The TSP is administered by Federal Retirement Thrift Investment Board, an independent government agency managed by five board members and an Executive Director appointed by the president. They are required by law to manage the plan "prudently and solely in the interest of the participants and their beneficiaries."
If you are in the military or are a federal employee, you have government retirement programs available. But you may also want to contribute portions of your income to IRAs to enhance your retirement income. The TSP offers both Traditional and Roth IRAs to which you may contribute, and you may have one of each for diversity. The plans work similar to any other IRA, and TSP manages them almost like a bank. You may make periodic transfers out of your regular TSP savings plan into your IRA. You must be an eligible federal employee to use TSP.
Richard Asmus was a writer and producer of television commercials in Phoenix, Arizona, and now is retired in Peru. After founding a small telecommunications engineering corporation and visiting 37 countries, Asmus studied broadcasting at Arizona State University and earned his Master of Fine Arts at Brooklyn College in New York.