"...most of the military TSP investors pick a percentage and leave it at that. If that is your investment strategy, Roth is the way to go."
Why invest less and pay taxes now?
Why not invest more and pay taxes later?
"The returns may grow untaxed in the regular TSP, but they are taxed when withdrawn."
Yes, more money when withdrawn, with a lower tax rate, since, you probably won't be earning as much when you retire.
"Also I don't understand your comment about paying more for goods and services."
Think about what Roth offers.
1.You pay taxes now.
2.You invest less now.
3. Your money fails to multiply as quickly as in Traditional for decades....
Why would someone choose Roth? Because, it is assumed that, in the future, you would pay a much higher tax rate than you would now, and that that higher tax rate would far outweigh the greater, non-taxed, savings that have been multiplying without taxes for decades.
Not only is the above hypothesis questionable, since clearly, the longer the time interval, the greater the non-taxed savings would be, but further...
4. If you are working less when you retire, your tax rate will likely be LOWER than it is now.
5. And there is, of course, the possibility that all tax rates will be LOWER in that distant future.
6. IF #5 comes to pass, you would not only have paid a higher tax rate under Roth, and accumulated less savings under Roth, but you would now also be using those reduced savings at a time of considerably higher costs for goods and services. (due to supply and demand factors, and reduced subsidies, both due in large measure to the lower tax rate)
Posted by: sarah_oz@yahoo.com
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