What are the two types of TSP contributions available?

• A. Traditional or Roth
• B. Roth only
• C. Traditional only
• D. Pre-tax and post-tax as separate categories

Answer: (A)

In TSP, there are two contribution types based on how taxes are handled: Traditional and Roth. Traditional contributions are made with pre-tax dollars, which lowers your current taxable income and lets the account grow tax-deferred; you’ll pay taxes on withdrawals in retirement as ordinary income. Roth contributions are made with after-tax dollars, so they don’t reduce your current taxable income, but qualified withdrawals (including earnings) are tax-free in retirement. You can mix both types in your TSP, and employer matching generally goes into the traditional portion. The option describing pre-tax and post-tax as separate categories is aiming at the same idea but uses nonstandard terminology; the official labels are Traditional and Roth.