Tax advantages of TSP investing

The government wants workers to save for their own retirement.  To encourage this saving, it extends a couple of some pretty nice tax benefits to.  First, ...(not sure if we need the three buttons)

Below we'll discuss the significant tax benefits of 401K investing with TSP, introduce a 'Roth' version of the TSP wit slightly different rules, and detail a prime advantage of TSP other other 401Ks: low fees.  

Tax Advantages

401K investing allows you to save in a 'tax-deferred' manner, meaning the interest, dividends, capital gains from the investment are not taxed in the year they are earned, but instead taxed when the funds are withdrawn in retirement.  That means those funds can continue earning compound interest for years or decades, a big benefit over taxable accounts.  Additionally, you are able to reduce your taxable income for the year by every dollar you save into your 401K, because your contributions are pre-tax.  That means saving $10K in your 401K will yield a $2500 bump in your tax return.

Roth TSP

TSP's Roth 401K differs from a traditional 401K in one important way.  

The contributions the a Roth TSP are contributed post-tax, so you don't get the tax return boost when filing that year's return; instead your withdrawals are tax-free, meaning you avoid a tax bill in retirement.  Every cent in your Roth TSP account will be yours on withdrawal - no need to pay taxes.

Deciding whether to opt for the Toth TSP or the traditional TSP then is a bit of a 'pay now or pay later' proposition. 

This article does a pretty good job of explaining the differences:

https://www.futureadvisor.com/content/blog/traditional-vs-roth-thrift-savings-plan-tsp-contributions

Ultra-low Expense Ratios

TSP has a limited number of funds to choose from and they simply track market indexes, limiting investor choice and ability to specialize.  What TSP lacks in variety, it makes up for in its industry-leading expense ratios