The Roth TSP differs from the Traditional TSP in the tax treatment of the contributions and distributions. In the Traditional TSP you are deferring taxes, meaning your contributions actually "lower" your taxable income for that current year as far as the IRS is concerned by contributing it to the TSP with an "IOU" attached to it. By deferring taxes you are choosing to wait to pay taxes until you pull the money out in the future.
In the Roth TSP, you pay taxes before putting the money in, which allows you to pull the money out later tax free (so long as certain requirements are met)! This allows the Federal Employee to hedge against higher tax rates in the future by paying a known rate today before investing rather than an unknown rate later.
Traditional planning has always preached deferring taxes in order to pay them when you withdraw the money in retirement at a lower income tax bracket. But for well prepared FERS & CSRS Retirees t receiving 80%+ of their working "High-3" this often means that their retirement income is taxed at the same bracket as their working Federal Salary.
How does a Federal Employee enter a lower tax bracket in retirement?
Receive less income overall (negatively impact lifestyle by receiving less money)
Receive less taxable income (by utilizing Roth TSP, Roth IRAs, and Cash Value Life Insurance)
Why is this discussion so important?
Because CSRS pensions are 100% taxable and FERS employees that only utilize the Traditional TSP face income taxes on their pension, on the majority of their social security (either 50% or 85% of it will be taxable), AND on their TSP distributions. Meaning a tax rate increase would impact each aspect of retirement income and negatively affect the retirement lifestyle enjoyed by the retirees in both systems.
Where will taxes go from here?
If it is your personal belief that the government will have to raise taxes as the Baby Boomers leave the work force and begin stressing entitlement programs such as Social Security and Medicare, then you need to discuss with a CPA and a Federally Focused Financial Adviser strategies to protect your retirement income from Uncle Sam's outstretched hand!