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TSP

Administered by the Federal Retirement Thrift Investment Board, this defined contribution plan for federal employees has roughly 4,614,874 participants, and over $358 billion in assets under management. Ask your TSP questions and post related topics here.

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VAer1  
#1 Posted : Wednesday, September 9, 2020 7:27:19 AM(UTC)
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For my TSP account, there are both traditional balance (agency match & my contribution) and roth balance. If I retire early at MRA (age 57), can I rollover everything to my personal Roth IRA? At that time, I only need to pay tax on traditional balance? After conversion, all capital gain in my roth IRA is tax free?

Thanks.
TheRealOrange  
#2 Posted : Wednesday, September 9, 2020 8:52:49 AM(UTC)
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Originally Posted by: VAer1 Go to Quoted Post
For my TSP account, there are both traditional balance (agency match & my contribution) and roth balance. If I retire early at MRA (age 57), can I rollover everything to my personal Roth IRA? At that time, I only need to pay tax on traditional balance? After conversion, all capital gain in my roth IRA is tax free?

Thanks.

Yes, it appears so. From TSP: "Any portion of a distribution from a participant's traditional balance (other than tax-exempt contributions) that is
transferred to a Roth IRA will be taxed in the current year." So, if you transfer your tax-deferred TSP contributions and earnings to a Roth IRA, you are required to pay income tax on the entire amount of the transfer for the year of the transfer. Any future earnings on the Roth IRA will be exempt from taxes as long as you meet the criteria for withdrawing from a Roth. Note also that your Roth IRA transfer is considered to be an eligible rollover distribution, so TSP will not withhold any taxes on the transfer. You will need to be sure that you have other available funds to cover the tax liability resulting from the transfer. Who knows what the tax situation will be at the time your retire, but you may want to check out IRS Publication 590.
ex-military  
#3 Posted : Wednesday, September 9, 2020 11:52:08 AM(UTC)
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Originally Posted by: TheRealOrange Go to Quoted Post
Originally Posted by: VAer1 Go to Quoted Post
For my TSP account, there are both traditional balance (agency match & my contribution) and roth balance. If I retire early at MRA (age 57), can I rollover everything to my personal Roth IRA? At that time, I only need to pay tax on traditional balance? After conversion, all capital gain in my roth IRA is tax free?

Thanks.

Yes, it appears so. From TSP: "Any portion of a distribution from a participant's traditional balance (other than tax-exempt contributions) that is
transferred to a Roth IRA will be taxed in the current year." So, if you transfer your tax-deferred TSP contributions and earnings to a Roth IRA, you are required to pay income tax on the entire amount of the transfer for the year of the transfer. Any future earnings on the Roth IRA will be exempt from taxes as long as you meet the criteria for withdrawing from a Roth. Note also that your Roth IRA transfer is considered to be an eligible rollover distribution, so TSP will not withhold any taxes on the transfer. You will need to be sure that you have other available funds to cover the tax liability resulting from the transfer. Who knows what the tax situation will be at the time your retire, but you may want to check out IRS Publication 590.


Thats going to be a BIG tax bill.
roger.d  
#4 Posted : Wednesday, September 9, 2020 3:51:01 PM(UTC)
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You can roll to traditional TSP to a traditional IRA without incurring a tax bill.
someoldguy  
#5 Posted : Wednesday, September 9, 2020 3:57:14 PM(UTC)
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Of course you don't have to roll it all over in a single year...

I'm looking into something like this, to move some IRA/401K money from traditional to Roth. But it appears that unlike the original contribution, which you can make right up until tax day, Roth conversions have to be done before December 31st. The goal is to convert as much as you can without bumping into the next tax bracket... but it is a little trickier to figure that out before April 15th, or at least before you get all your tax documents.

Is that correct? Anyone have different info?
DISCLAIMER: You read it on an open internet forum :)
roger.d  
#6 Posted : Wednesday, September 9, 2020 4:25:53 PM(UTC)
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Originally Posted by: someoldguy Go to Quoted Post
Of course you don't have to roll it all over in a single year...


<snip>



This would be the best option.

I don't know if you can go from a tTSP to a rIRA.

IMO, it would be best to move from a tTSP to t tIRA at some place like Fidity or Vanguard. Then convert what you can, avoiding moving to the next tax bracket.

This is all based upon "WHY" you are doing this.
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