Roth TSP vs. Roth IRA: That's what a lot of federal government civilian employees and members of the U.S. military want to know when it comes to choosing a retirement savings plan. While both are Roth accounts, they have different tax benefits, contribution limits, withdrawal rules, and required minimum distributions (RMDs).

Key Takeaways

  • A Roth IRA is an individual retirement account that you open and fund directly.
  • Roth TSPs are the U.S. government’s version of a Roth 401(k), and they're funded through payroll deductions.
  • Roth IRAs and Roth TSPs have different rules regarding taxes, contribution limits, withdrawals, and required minimum distributions (RMDs).

What Is a Thrift Savings Plan?

The Thrift Savings Plan (TSP) is a defined-contribution retirement plan run by the Federal Retirement Thrift Investment Board. It's the U.S. government’s version of a 401(k) retirement plan. There are two different plans—one for civilian civil-service employees and one for members of the military.

The difference between the two Thrift Savings Plans shows up when it comes to matching your contributions. If you're a civilian government employee, Uncle Sam matches up to 5% of your base pay that you contribute to a TSP account. Except under rare circumstances, this option is not available to members of the military plan.

TSPs are tax-deferred retirement plans. That means your annual contribution reduces your taxable income for that year, which saves you money at tax time. Your investments grow tax-deferred. And when you start taking distributions, you pay taxes on the amount you withdraw.

Thrift Savings Plan Contribution Limits

TSPs parallel the contribution and catch-up limits of the 401(k) plans open to private-sector workers. For 2020, the Thrift Savings Plan contribution limits are as follows:

  • $19,500 if you're under age 50 ($19,000 for 2019)
  • $26,000 if you’re age 50 or older ($25,000 for 2019) and includes a catch-up contribution of $6,500 ($6,000 for 2019

What Is a Roth Thrift Savings Plan?

The TSP also offers an after-tax Roth option similar to a Roth 401(k). The contribution limits are the same as they are for traditional TSPs, but the Roth version is taxed differently.

5.5 million

The number of people who participate in a Thrift Savings Plan; 1.4 million of these have Roth accounts.

With traditional TSP contributions, you get a tax break now and pay taxes in retirement. Conversely, you make Roth TSP contributions with after-tax dollars. So, you don't get a tax break now, but the account grows tax-free over the years. And your withdrawals in retirement are tax-free, as well.

One caveat is that any matching contributions you receive for your Roth TSP will automatically go into a traditional TSP. That means you'll pay tax on those contributions (but not their earnings) when you withdraw those funds in retirement. Roth 401(k) matches are treated the same way.

Combat Zone Tax Exclusion

If you're a member of the military, TSP taxes may work differently because of the Combat Zone Tax Exclusion. The income you earn while deployed in a combat zone is excluded from your taxable income. As a result, your contributions to a Roth TSP (or a Roth IRA) are exempt from taxes. 

Note that qualified withdrawals in retirement from a Roth TSP (or Roth IRA) are always tax-free.  That means that a military member who is deployed to a combat zone can divert money into a Roth TSP (or Roth IRA) and never pay tax on the contributions or earnings. 

What Is a Roth IRA?

A Roth IRA is an IRA that you fund with after-tax dollars. Like a Roth TSP, you pay taxes upfront, and then your withdrawals during retirement are tax-free. 

Roth IRAs have other benefits, too:

  • Your contributions and earnings grow tax-free.
  • You can withdraw contributions at any time with no tax or penalty.
  • There are no RMDs for your lifetime.

Roth IRA Contribution Limits

For 2019 and 2020, the Roth IRA contribution limit are as follows:

  • $6,000 if you're younger than age 50
  • $7,000 if you're age 50 or older (this includes a $1,000 catch-up contribution)

To contribute to a Roth IRA, your income from wages and other sources must match or exceed your contribution for the year. Also, your contribution may be reduced (or eliminated), depending on your modified adjusted gross income.

Here's are the Roth IRA income limits for 2020:

Roth IRA Income Limits
If your filing status is… And your modified AGI is… You can contribute…
Married filing jointly or qualifying widow(er) Less than $196,000 Up to the limit
  More than $196,000 but less than $206,000 A reduced amount
  $206,000 or more Zero
Single, head of household, or married filing separately and you didn't live with your spouse at any time during the year Less than $124,000 Up to the limit
  More than $124,000 but less than $139,000 A reduced amount
  More than $139,000 Zero
Married filing separately and you lived with your spouse at any time during the year Less than $10,000 A reduced amount
  $10,000 or more Zero

How Do Roth TSPs and Roth IRAs Compare?

While Roth TSPs and Roth IRAs are excellent retirement-savings vehicles, they have different characteristics and benefits. Here’s a comparison.


Both are after-tax retirement accounts. You pay taxes on your contribution the year you make them (unless you qualify for tax-exempt contributions). Contributions and earnings grow tax-free, and qualified withdrawals are tax-free, as well (except for matching contributions).  

Both are subject to the 5-year rule. To take tax-free distributions, you must be at least age 59½ or have a permanent disability, and at least five years must have passed since Jan. 1 of the year you first contributed. 


With Roth IRAs, you contribute directly to your account. Roth TSP contributions come out of payroll deductions. Roth IRAs are subject to income limits, but you can contribute to a Roth TSP no matter how much you earn. 

You can withdraw your Roth IRA contributions at any time, with no tax or penalty. This is not an option with a Roth TSP.

Roth IRAs have no required minimum distributions (RMDs) during your lifetime. But you must start taking RMDs from a Roth TSP at age 70½ (unless you're still working at your federal job).

Roth IRA vs. Roth TSP: Which Is Better for You?

There’s an important question to ask before you decide: Do I qualify for matching funds? If you’re a civilian employee and qualify, you should contribute at least up to the federal match first because you earn 100% on matched money (think: free money).

If you’re a member of the Armed Forces and don’t earn matching contributions, it could be more beneficial to invest in a Roth IRA first for its excellent tax benefits and freedom from RMDs later in life. No RMDs mean you can leave your savings untouched if you don’t need the money. And your beneficiaries can enjoy years of tax-free growth and income. 

Then, if you have extra money left to contribute, consider either a regular or Roth TSP contribution, depending on whether you want a tax deduction now or later.

The Bottom Line

Roth TSPs and Roth IRAs are excellent ways to save for retirement. And there are no rules that prevent you from contributing to both. Ideally, you could max out both accounts to boost your retirement savings.

Before making any decisions about your retirement savings accounts, it's helpful to discuss your options with a trusted financial planner or advisor.