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Retirement Planning


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BBRRTT  
#1 Posted : Saturday, January 13, 2007 3:27:49 AM(UTC)
BBRRTT

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I understand that you can transfer qualified 401k to TSP. My question is the possible loss in doing so. I would think that it might be possible to sustain considerable losses when closing one 401k and buying into TSP? Shouldn't this be a consideration? Can anyone who has transferred 401k money into TSP reply regarding any losses or gains incurred. I understand that each individual situation is different but in general has anyone considered this when moving accounts. I wonder if moving the funds in increments might be possible. We are considering moving our two old Fidelity 401k accounts to TSP and wonder if timing was considered by others. Thanks for any insight.
edalder  
#2 Posted : Saturday, January 13, 2007 4:16:33 AM(UTC)
edalder

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If you have, for example, $10,000 in an old 401k and your transfer it to the TSP, then your TSP account value should increase by $10,000. Generally, your old plan liquidates your mutual funds/stocks/investment securities and just transfers the money.

Now, if your funds in the old 401k are invested in highly volatile securities, then you may realize a loss on the transaction, depending upon the timing of your original buy and sell transactions. However, you could have the same issue with an interfund transfer within your TSP. Market risk is not something that you can entirely eliminate with any market transaction that you make. Also, if you liquidate the old investment at a loss, who's to say that it would have recovered its original value had you remained in it?

Also, you may encounter some administrative fees from the old plan. I once transfered an inherited IRA from one mutual fund company to another and I was charged a $35.00 administrative fee.
Kivi
jbrown3944  
#3 Posted : Thursday, January 18, 2007 6:58:33 AM(UTC)
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I know you can rollover TSP into IRA. I don't think you can do it the other way around. I think you'd have to close out the IRA & have whatever penalties & buy into TSP. Understand the maximum of $15,000 per year can be put into TSP.
BBRRTT  
#4 Posted : Thursday, January 18, 2007 8:35:49 AM(UTC)
BBRRTT

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Yes, you did touch upon my concern that we may, given the share price at sell of various funds upon withdrawal from old Fidelity 401K and the share price of new fund buys at TSP risk considerable losses. I do know that for the long haul TSP has considerably cheaper expense ratios as compared to Fidelity. But, I worry that we might lose in the transfer more than we will save in overall fund expenses. How I would go about calculating that seems impossible...just wondering if anyone who did make this kind of 401k to 401k direct rollover experience this kind of problem?
Z28  
#5 Posted : Thursday, January 18, 2007 12:11:19 PM(UTC)
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You can transfer money from an IRA to a TSP without any penalty.

The two accounts must both be tax deferred accounts for this to work.
elgallo2  
#6 Posted : Thursday, January 18, 2007 10:27:39 PM(UTC)
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I have had a tax deferred annunity with Prudential for over 20 years. The origional source of funds was from a previous employers 401K plan that I rolled over into the Pru annunity.

Do the funds qualify for rolling over into my TSP since 1. orig. $$$ are from a qualified 401K and 2. Are currently in a tax deferred status.
yakers  
#7 Posted : Friday, January 19, 2007 12:06:09 AM(UTC)
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egallo2, that is a complicated question, I would send a formal letter (you can fax it) to the TSP administration. I did transfer/rollover traditional IRA money (tax deferred) into my TSP account. It seems like a simple process but getting the right signatures and authorizations between the TSP and my IRA company took some time & effort. I do not see your case specificly addressed but as the funds are tax deferred it may work out for you.
BBRRTT  
#8 Posted : Friday, January 19, 2007 2:36:06 AM(UTC)
BBRRTT

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If you read the instruction form that comes with the TSP-60 (the form you need to accompany your transer/rollover, which you can find on TSP.GOV website) it states:

"Eligible Employer Plan. This is a plan qualified under I.R.C. 401 (a) (including 401(k) plan, profit-sharing plan, defined benefit plan, stock bonus plan, and money purchase plan); an I.R.C. 401(a) annuity plan; an I.R.C. 403 (b) tax-sheltered annuity; or an eligible I.R.C. 457 (b) plan maintained by a govermental employer. In order to be transferred or rolled over into the TSP, the distribution from an eligible employer plan must be an "eigible rollover distributon."


It then goes on to describe the types of distributions it can be. I don't know if your particular annuity falls into one of the above listed qualified plans but I would certainly make a call to TSP 866-458-1452 and find out.

We are proceeding to move our two 401k plans into TSP to capture the low expense ratio fees associated with TSP. Even though we may sustain some losses due to the "buy low/sell high" theory during the move... but, TSP is still hailed by MSNMoney and others as the Platinum 401K plan in the country compared to any other available. Check out MSNMoney for related articles to this end.
Good luck.
elgallo2  
#9 Posted : Friday, January 19, 2007 2:41:05 AM(UTC)
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BB

It appears that from what excerpts you posted from the regs, that my annunity would qualify. I will however confirm this.

Thanks for the info.

BTW if you transfer now you would be selling somewhat of a market high.

To avoid buying high going into the TSP, I would suggest temporarily changing my contributions to the TSP to go 100% G fund. This scheme will only apply IF the Contributions drive how the monies are distributed going into the TSP.

Once there in the G fund, wait for a meningful/reasonable drop in the market and buy into the market in whole or incremmentally on the way down.

If the market keeps going up well...oh well!

[This message was edited by elgallo2 on January 19, 2007 at 02:01 PM.]

[This message was edited by elgallo2 on January 19, 2007 at 02:03 PM.]
BBRRTT  
#10 Posted : Friday, January 19, 2007 2:45:58 AM(UTC)
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When questioning Fidelity about any charges that we might incur related to the move we recognized that although Fidelity proper would require no charges our individual funds may have fee's, i.e. short term charges for selling early on most recent purchases/contributions, etc. So, make sure that you understand the various and usually hidden fees associated with moving/selling or otherwise tampering with your funds. Crunching as much of the math as we could, it still seems profitable to make the move to TSP, particularly if you have more than a decade to go before needing the funds.
BBRRTT  
#11 Posted : Friday, January 19, 2007 3:06:42 AM(UTC)
BBRRTT

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That is exactly what we were considering doing, the rules, as I understand them, are that your rollover will be distributed at your current allocation on file. So we would need to change our future contribution allocation to the G fund, if we decided to go that way.

Just wondering...since we are selling out high (at Fidelity) and ultimately wanting to have funds in the L2020 would it make that much difference. Currently the L2020 is about $15.60 a share. (I guess they average the share price of all the funds associated to come up with this price?) I'll have to go look at what are average share price is at Fidelity again.

Thanks for your suggestion.
elgallo2  
#12 Posted : Friday, January 19, 2007 3:47:30 AM(UTC)
elgallo2

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Great minds often think alike!

I really can't answer your question to be honest. Sounds like you are aways away from retirement, so you have time on your side. So an educated increase in risk could be justified.

I am 2.5 years from retirement and have 95% of my and my wifes retirement in the market. I would hope I would not have to tap the TSP prior to age 70.5 when the IRS mandated MRD kick in.

The L funds are good if you want someone else to do the investment thinking for you. I dont trade much if at all since I am a buy and holder.

BTW I manage my wife's Fidelity account as a Proxy and use this paid site for investment advise:

http://www.fidelityinsight.com/
BBRRTT  
#13 Posted : Friday, January 19, 2007 5:10:10 AM(UTC)
BBRRTT

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My husband is currently 50 and we have contributed into 401k for the last 20 years. We aren't all that savvy investment wise and our overall goal was also to buy and hold. As a matter of fact this is the first real movement we have ever made. We believe my husband will remain in the Gov't through retirement and hope this final move to incorporate our accounts will ultimately be a wise choice. Who knows.

We sustained huge losses (50%) of our accounts back in 2002 and are just now recovering to our old balances. We lost half of our money in a matter of months and it has taken over 4 years to regain! But, we held out that buy and hold was the way to go. Our decision to invest in the L2020 fund is primarily to decrease the likelihood of an overall hit that substantial ( we currently are invested 100% in stocks) with minimal input on our part.

I guess, if you are so inclined, you could manage this yourself by adjusting your accounts into safer investments and making sure that you are diversified in bonds and other gov't securities as you near the time you need the money but this seems an idea vehicle to use to do just that. I hope in 10-15 years I'm not eating my words...so to speak. I'll update on our rollover progress as we proceed and make note of any difficulties and God forbid major losses incurred.
FlatBroke  
#14 Posted : Friday, January 19, 2007 5:26:56 PM(UTC)
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quote:
Originally posted by BBRRTT:
The rules... are that your rollover will be distributed at your current allocation on file. So we would need to change our future contribution allocation to the G fund, if we decided to go that way.

Just wondering... and ultimately wanting to have funds in the L2020 would it make that much difference. Currently the L2020 is about $15.60 a share.

That is correct at per the TSP website:
quote:
Once the TSP receives a properly completed Form TSP-60 and your check or money order, the funds will be invested in your account according to your most recent contribution allocation.
Three L Funds have moved up about $.20 since Dec 05 2006. It really shouldn't make that much difference if or when you transfer directly into L2020, but if you wish you can change your future contribution allocation to 100 G.

Sorry to hear about your 2002 losses. You really shouldn't be 100% stocks now and I suspect you may have been in 2002 or you sold low and locked in your losses. Consider reading Berstein's The Four Pillars of Investing, Ferri's All About Asset Allocation, or a primer Dyson's Mutual Funds.
gd540  
#15 Posted : Tuesday, January 23, 2007 12:36:35 AM(UTC)
gd540

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Early this month I moved some Traditional IRA funds from a maturing CD to TSP. I filled out the form (TSP-60) and mailed it in. The deposit was posted to my TSP account within one week. Simple...easy...painless... (ain't that unusual!)
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