I understand why it wouldn’t matter which TSP (Traditional TSP or Roth TSP) you invest in if you will be in the same or higher tax bracket when you retire, but what about the exemptions your are claiming (dependents)? Logic tells me that my five dependents give me a much lower tax rate; therefore, I should be contributing all my money to the Roth TSP to take advantage. Am I way off base here?
Your logic makes sense. I think you end up paying approximately the same amount of taxes either way in the long run. If you have a low tax rate now, I think the Roth makes sense, especially considering that your salary will increase over time. Since they only started allowing Roth contribution a few years ago, all my TSP contributions are traditional. Everything will pay out proportionally among the different funds/Roth & Traditional, which is a bit confusing to me. If you have significant growth in your TSP as we all hope to achieve over our careers, the Roth makes sense. You may want to ask a tax advisor who may be in a better position to assess your specific situation given your current status and any assumptions you are making regarding future earnings.
I did start a Roth outside of TSP a few years ago because there are advantages of having tax free income in retirement and it can be passed on to your heirs tax free as well.