The Thrift Savings Plan vs Roth 401k

Both the thrift savings plan and the Roth 401(k) are popular types of retirement plans. While they do have some similar features, they are unique plans that can benefit retirement savers in different ways. Here are the basics of the thrift savings plan and the Roth 401(k) and how they compare to each other.


Among the biggest differences between these two types of retirement plans are the eligibility requirements. With the thrift savings plan, you have to be a government employee in order to be eligible. With a Roth 401(k), you have to be employed by a company that offers this option as a retirement plan.

Tax Advantages

Another big difference between these two types of plans is in the way that taxes are handled. Each of these plans will offer you a definite tax advantage when you contribute. However, they work very differently from one another. With the thrift savings plan, employees will be able to make contributions with pretax dollars. This means that the money is deducted directly from their paycheck and the government does not impose any taxes on the money. The money is then invested into securities and is allowed to grow tax-free as well. There are no taxes incurred until you retire and start to take withdrawals on the money.

The Roth 401(k) handles taxes in the opposite manner. You fund the Roth 401(k) with after-tax dollars. The money in the account is allowed to grow tax-free as well. Then, whenever you start to take withdrawals upon retirement, you do not pay any taxes whatsoever.


Both of these plans have the same annual contribution limit for employees. You can contribute up to $16,500 per year or $22,000 per year if you are over the age of 50. Although technically they have the same contribution limit, the Roth 401(k) will allow you to put away more money for your retirement. With the thrift savings plan, you are allowed to put away $16,500 of pretax money. This means that once you retire, of that $16,500 a portion of it will be deducted for taxes. With the Roth 401(k), you can put away $16,500 of after-tax money. This means that you are actually setting aside more than $16,500 to get to that figure after taxes are paid. When you retire, the entire $16,500 will be yours to keep.


Each of these retirement options has a provision for making early withdrawals. With the thrift savings plan, you can make an in-service withdrawal of up to $1000. When you do this, there will not be any penalties or fees imposed. With the Roth 401(k), you will be able to withdraw the money that you have contributed at any point without penalty. However, if you take out any of the money that was earned from investments, you will pay a 10 percent early withdrawal penalty on the money.

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