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A battle of the titans. At least that’s how I see it. Two heavyweights in the military retirement planning arena square off. Who wins? It’s a question, maybe not posed in those terms, I hear all the time.


Ever the glass half-full guy, my answer is … both. However, I recognize that’s not always possible given all the competing financial priorities military families face on a day-to-day basis. So, here I’ll break down nine key factors or considerations that may play into your own decision as you craft your retirement savings strategy.


  • The Roth TSP rules on the expense front. It’s hard for an IRA to compete when it comes to operating expenses. The average expense ratio with the Thrift Savings Plan is .033%. That equates to 33 cents on every $1,000 invested. On the other hand, what you pay with an IRA will depend on where you invest, but likely, it will be more and maybe, much more. According to the Investment Company Institute, the industry wide expense ratios for index funds and exchange traded funds in the top quarter (those with the lowest expense ratios) of funds can be 6 times higher than the TSP and the bottom half (more expensive funds) are at least 14 times more expensive. That’s money out of your pocket and if you look at actively managed options, the numbers may favor the TSP even more.  
  • Access favors the Roth IRA. You can withdraw contributions to a Roth IRA at any time without any income taxes or penalties. That’s not an option available through the TSP.
  • Loans available through the TSP. Speaking of access, the TSP does allow loans. Taking one is not necessarily a good idea, but it is an option not available with a Roth IRA.
  • Investment choices Roth IRA. Currently, the TSP offers a limited selection of investments. Don’t get me wrong, they are broad-based and, in the case of the G Fund, unique. However, if you’re looking to invest in real estate, commodities, emerging markets or other more “niche” areas, the TSP doesn’t give you the options that a Roth IRA does. By 2021, the TSP plans to make a “mutual fund window” available that should allow participants a wider selection of investments.
  • Either can be automated. Pay yourself first. This is a concept that works. Since contributions to the TSP are made via payroll deduction, that is, by definition, “first.” Of course, you can set up an allotment or an automatic investment to fund your Roth IRA and get similar results. What I do like about the TSP is the option to set up your contributions as a percentage of your pay rather than as a flat dollar amount. Over time, with pay raises and promotions you’ll be saving more, even if you don’t increase that percentage (which I hope you will!).

  • Both Roth options offer retirement flexibility. Access to a tax-free stream of income in retirement is something good that both the Roth TSP and Roth IRA offer. When implemented, The TSP Modernization Act of 2017 will give retirees with TSP accounts more options than they currently have when accessing their money. The new law will eliminate the one-partial withdrawal over a lifetime limit and allow withdrawals to be made from only Roth money within the account. These changes will level the “flexibility playing field” between the Roth TSP and Roth IRA.  One difference will remain: Roth IRAs are not subject to Required Minimum Distributions like the Roth TSP at age 70 ½.

  • Both should be top of mind during deployment. Roth, whether it’s TSP or IRA, can be a great way to save for retirement while you’re in a tax-free combat zone. Roth contributions with tax-exempt combat pay offer the potential to build a pot of retirement money upon which you will never pay taxes.

  • Roth TSP available to all. Anyone who is currently serving can sign up and contribute to the Roth TSP. There are no income limits. In 2018, single taxpayers with income above $135,000 cannot contribute to a Roth IRA ($199,000 for joint filers).



  • The TSP allows you to pile on. In 2018, the maximum you can contribute to the Roth TSP is $18,500. If you’re 50 or older, there’s an extra additional $6,000 “catch-up” contribution. For a Roth IRA, the max is a relatively paltry $5,500 plus an extra $1,000 for those 50 or over.
  • The TSP may offer free money. Those covered by the new Blended Retirement system that contribute 5% of their own money can garner a total of 5% in government contributions to their TSP account. That’s a sweet deal you don’t want to miss out on.In whatever form or fashion, putting away money for retirement will help create flexibility and options for you down the road. The most important decision may not be which of the two heavyweights wins, but rather your decision to join the fray.

What would you choose, a Roth IRA or a Roth TSP? Share in the comments.


About the Author: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.


* Disclosures: "Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements."

 The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.

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Occasional Visitor

While I applaud your TSP vs Roth blog.....I am a retired Marine Reservist as well as a former Federal Employee with access to my TSP (Fed Empl).  Your blog is military centric in that it does not address Federal Employees that may require advice or information regarding TSP withdrawal options.


As a military retiree, I retired before service members could participate in the TSP.  As a civilian federal employee for the military in a permanent position, I could participate (and did).  Due to circumstances beyond my control, I had a break in federal civilian service, and came back in a temporary funded position, I was a "term" employee and thus not eligible to make additional contributions to my TSP account.   When I finally left federal civilian employment, TSP DID NOT automatically change my status from federal employee to civilian, and it's important to have that status correct!  Withdrawal options change once an employee separates and reverts to Civilian status.

Occasional Visitor

Military centric information, without much mention regarding federal employees that qualify for Roth TSP and IRA's. The matching contributions need to be emphasized more as this is truly free money and offers a way to maximize savings. I am not sure why the G fund was singled out as unique, as it is not a good place to try and grow your money. Might as well put it in a 'savings' account'. The C fund (index) in particular and the targeted funds are better suited to novice investors. I don't think this was well written. 

Occasional Visitor

If you have the means and can manage your budget to support both the Roth TSP and Roth IRA then you get the benefits of both. Yes, $24,000 a year is a lot to save but you’ll never look back and say “man, I wish I hadn’t saved so much money when I was younger,”


Also, for the FERS commenters - the third sentence of the article says “military retirement planning arena” - not civil service retirement planning arena. Military was the targeted audience for the this article. 


Why must one make a choice? You can do both of these at the same time. 

J.J. Montanaro USAA
Community Manager
Community Manager

Thanks for reading and for your comments. I was out of the office and am a bit late to the game, but will try to address each here, if only in a small way.


As I said early on in the article, I agree with @Becky9999  and @Dru610, the more we can save for retirement, the better! In America, we don't have a "too much saving for retirement crisis" on our hands!  


@MD89 I appreciate your sentiments about not missing out on matching contributions, it's hard to put too much emphasis on those kind of opportunities.  


Here's a link to the TSP brochure on withdrawing your TSP account. It contains many of the details beyond the scope of this article...for anyone with a TSP account, military or civil service. And as @WHSTRAT notes, withdrawal options for active and separated employees are different. 


All the best, JJ

New Member



Never leave matching anything on the table. 

TSP is awesome

Dividend reinvestment in the IRA ROTH is more awesome

Its never how much money you have but, how much can I get paid each month with out depleting principle. 

J.J. Montanaro USAA
Community Manager
Community Manager


Thanks for reading! I’m also excited about servicemembers, those covered under the Blended Retirement System, having access to TSP matching contributions.

New Member

Amoung the list of advantages you cite should be the ability to maximize contributions  to both the TSP and the IRA.  (perhaps implicit in the 'piling on' bullet) A Fact Sheet from the TSP (5/2012) says it is allowed but the Fact Sheet has not been updated while the Tax code has.

Could you share some thoughts about current rules (IRS) for making contributions to both my TSP and IRA in the same year.  Specifically, can contribution to TSP be maximized (for the year) without affecting the contribution limit to the IRA (Roth or Traditiional)?