Partial rollover of TSP into Roth IRA while employed?

[EpicWin]

Can this be done? What are the implications for penalties?

[chief04010]

It would depend on your age, if you are 59 1/2 or older it can be done. Younger than that, forget about it until you retire.

[mindofmush]

The proposed changes to TSP withdrawal rules will retain the 59.5 age limit though it will allow more partial withdrawals.

A transfer from a RothTSP account will require both a Traditional IRA and a Roth IRA set up prior to the transfer. Even a 100% RothTSP account has a Traditional TSP portion from any matching funds the GOV puts into your account. Any withdrawals or transfers will be done proportionally but they will count the transfer into each (Traditional & Roth) as one event.

Any transfer from a Traditional TSP or IRA to a Roth IRA will count as income for that year so that you pay taxes at the new higher rate.

My recommendation is to transfer any Traditional TSP to a Traditional IRA so that you incur no penalties or taxes due for this event. Then transfer 10% or more each year to the Roth IRA to move it all by age 70 and spread out the taxes owed on the transfers.

[walker]

Good insight thanks

[oldjack]

...
A transfer from a RothTSP account will require both a Traditional IRA and a Roth IRA set up prior to the transfer. Even a 100% RothTSP account has a Traditional TSP portion from any matching funds the GOV puts into your account.

Yet one more reason, of way too many, why the TSP is a FAIL and you should invest all your money above the matching 5% contribution into better alternatives, i.e., commercially available IRA options.

[briana]

I disagree that the TSP is a fail. It may not offer as many options as outside accounts, but it has come a long way from its early beginnings. I for one am very happy with my TSP account and the available options.

[mhayes]

I don't know, the way the government is messing with our benefits, who knows what they'll do with our 401k.

[briana]

So far the new proposals are still in work. Hopefully anything that actually gets passed will only affect new employees.

[cswift01]

So far the new proposals are still in work. Hopefully anything that actually gets passed will only affect new employees.

Hopefully better minds will avoid the bad decisions all together. I know that some people think federal employment is too generous, but it is one of the few bastions of the middle class still available.

Best,

Me

[Timber82]

I don't know, the way the government is messing with our benefits, who knows what they'll do with our 401k.

They can get rid of the 401K for all I care, as long as they don't touch my TSP

[briana]

Ditto.

[mindofmush]

I don't know, the way the government is messing with our benefits, who knows what they'll do with our 401k.

They can get rid of the 401K for all I care, as long as they don't touch my TSP

The IRS considers the TSP as a 401K for government employees; the tax rules are the same for both.