What Are The Differences Between the Roth TSP and a Roth IRA?

Can federal employees invest in both the Roth TSP and a Roth IRA? The author explains the similarities and differences between these two retirement savings account types.

Federal employees may be concerned about what happens when they stop actively collecting an income. This is where saving and investing comes in. Luckily, federal employees have retirement savings options, mainly the Roth TSP and a Roth IRA.

While these accounts have many similarities, they are also quite different.

Roth TSP and Roth IRA Similarities

While they have closely-related names, if a federal employee contributes to a Roth TSP, it doesn’t necessarily mean they’re also adding to a Roth IRA.


Let’s start by looking at what the accounts have in common.

Both are considered “after tax accounts.”

This is the biggest benefit to using a Roth account for savings over other types of savings accounts. With Roth accounts, the account holder is taxed on the contributions — withdrawals are tax-free, as long as they meet the requirements, making finances much less stressful during retirement.

Both require a waiting period of 5 years before withdrawals can be made.

While withdrawals are tax-free, both the Roth TSP and Roth IRA have a 5-year waiting period. The account holder is allowed to take out funds once they’ve reached the designated age of 59 ½, provided the account has been open for 5 years or more.


Now that the similarities have been covered let’s look at what’s really important — the differences.


Contribution limits for the Roth TSPs are higher than Roth IRAs. Roth TSP accounts have a limit of $18,000 for those under 50, or $24,000 for those 50 or older. Roth IRAs, on the other hand, have an upper limit of $5,500 for those under 50 and $6,500 for those 50 and older.

Employer match

Employers can’t match contributions to a Roth IRA. They do, however, with a Roth TSP.


While Roth IRAs don’t allow account holders to take loans out of their account, Roth TSPs do. With a Roth TSP, you can borrow up to 50% of your vested balance, or up to $50,000.

Income caps

Roth TSP accounts have no income caps, but Roth IRAs do. This means no matter what your total household income is, you can still choose to defer up to the $18,000 (or $24,000 if you are over age 50) to the TSP Roth.

With a Roth IRA, you are only eligible to contribute the full amount if your Modified Adjusted Gross Income (MAGI) is under $133,000 for single filers and under $196,000 for joint filers. Your MAGI is your AGI but after adding back certain deductions like student loan interest and rental losses (among others).


Almost all federal employees are eligible to contribute to a Roth TSP. As long as they receive a paycheck and are under an eligible retirement plan, they may open a Roth TSP. On the other hand, being a federal employee is not a requirement for opening a Roth IRA.


Roth TSP contributions can only be invested in the options available through the TSP plan, so another major difference from Roth IRAs is that they can be allocated to many additional instruments. CDs, real estate investments, emerging markets, and annuities are all examples of investments that are not available within the TSP.

Can Federal Employees Invest in Both?

While considering the differences, federal employees may wonder if they can invest in both a Roth TSP and a Roth IRA.

The answer is yes. As long as an employee can afford to make contributions to both, they can and they should provided there are not more immediate needs for the funds.

Securities offered through Triad Advisors, Member FINRA/SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of PSG.

About the Author

Brian Kuhn CFP® is a financial planner at psgclarity.com in Maple Lawn, MD. He has been working with families since 2001 with a niche of federal employees. He is the author of The Personal Finance Handbook, a Guide to the Most Common Personal Finance Questions. Securities offered through Triad Advisors, Member FINRA / SIPC. Advisory Services offered through Planning Solutions Group, LLC. Planning Solutions Group, LLC is not affiliated with Triad Advisors. PSG Clarity is a division of Planning Solutions Group, LLC