5 Most Asked TSP Questions: Roth vs. Traditional, L Funds, & What to Do After You Separate #240

Spencer Reese tackles the five most common Thrift Savings Plan questions he receives from listeners via email, Instagram, and the podcast inbox. He covers the Roth vs. Traditional decision for service members, how to think about TSP fund selection within your overall asset allocation, why the TSP's tax advantages make it a standout account for military members, what happens if your contributions exceed the annual limit, and what to do with your TSP after separating from the military.

Questions asked and topics covered:

• Should I choose Roth or traditional TSP?
  • Why most service members should default to Roth given low taxable military pay
  • Combat Zone Tax Exclusion (CZTE) pay and why it makes Roth especially powerful
  • When traditional starts to make sense — 22%+ bracket, field grade officers, pilot or medical bonuses, high-earning spouse
  • The option to mix and match contributions
• What TSP investment strategy should I pick?
  • Applying your asset allocation across all accounts, not fund by fund
  • How C and S fund allocations translate to total US stock market exposure
  • Where international exposure fits in your IRA or brokerage account
  • The case for defaulting to a Lifecycle (L) fund based on birth year plus 65 or 70
  • Why there's plenty of time to adjust before bond allocations ramp up
• Is there a big reason to use the TSP over other investments?
  • Taxes as the primary driver — the triple tax benefit of untaxed military pay into Roth accounts
  • BAH, BAS, COLA, and CZTE as untaxed income
  • The automatic 5% BRS match after 24 months of service
  • In-plan Roth conversions for moving matched traditional dollars to the Roth side
  • Low costs and built-in diversification
• What happens if my contribution percentage exceeds the annual limit in December?
  • How DFAS caps and auto-adjusts your final contribution
  • How excess contributions are refunded if a mistake occurs
  • The 2026 contribution limit of $24,500
  • Why missing the max by a couple hundred dollars doesn't matter
• What should I do with my TSP after I leave the military?
  • Why leaving it in the TSP is the default recommendation
  • Continued access to the G Fund
  • Rolling outside 401(k) funds into the TSP to consolidate
  • When rolling over to a new employer's 401(k) or a traditional IRA might make sense