Just opened a Vanguard Roth IRA...

[badboy]

Also, you may find yourself in trouble. In an IRA account, you may have free riding violation.

Ah, this is what I was thinking about. Thanks.

[mmmmmbeer]

Also, you may find yourself in trouble. In an IRA account, you may have free riding violation.

Ah, this is what I was thinking about. Thanks.

Should be easy to get around this... just make less IFT's for super short durations.

For instance the Strategy ID# 15706:
http://tspcalc.com/seasonal.php?ID=1570 ... &CSImax=56

Std Dev: 9.44
CAGR: 26.63
Time in fund (%):
G- F- C- S- I
44 0 9 35 12

Time In Stocks (C,S,I): 56.00

18 IFT's, and none of them would fall under the "free ride" violation.

Now keeping that "free ride" rule in mind, and I think a guy/gal could start tweaking TSP Calc to find a better one.

[xelanader]

I will probably open a vanguard roth ira next month as well. Thanks for the info about the free riding violation. I think I may have found the strategy I might follow.

#18364
http://tspcalc.com/seasonal.php?ID=1836 ... sortby=avg

std dev: 4.82
CAGR: 29.21
G: 45 F: 0 C: 16 S: 34 I: 6

I think the only trade would need to be careful would be selling I in Sept to prevent free riding violation.

[fatchance]

Not bad, I like this one.

[BigDon]

That one is interesting.

[mmmmmbeer]

Okay... So I just explained to a buddy of mine my thoughts behind this Roth scenerio. I typed it to him, so I thought I'd put it in here so you guys can see my thinking.

I'm 43 now...

I'm doing 100% Roth TSP now

I figure my earliest I can retire is 7 years from now

The new limits for TSP is $18.5k a year.

I have about 7k in my Roth TSP right now... $18.5k a year x 7 years = $129,500 + $7k = $136,500 in Roth TSP at least...

That's not counting any compounding interest on the way up.

If I retire at 50.... my plan is to transfer my entire Roth TSP into my Roth IRA account.

You can't take out anything from Roth IRA until your 59.5 years old without penalty

So from 50 - 59.5 I'm going to keep it in that Roth IRA and do a Daily... letting it build up if the daily works how it has been.

So.... once I hit 59.5 years old... I can withdraw any amount I want from Roth IRA with ZERO taxes and ZERO penalties. If @ 59.5 I have almost a mil in there.... Daaaamnnn...

Also... the way TSP works... with you start taking a monthly draw.... it comes out 50/50 from traditional and roth alike....

Right now I have like 275k in my traditional....

Well I figure if we get say... 12% for the next 7 years... that's taking the 275k and only adding $556.50 a month which is the traditional matching.

@ 12% my Traditional TSP Balance will be $708,374.60

@ 15 $864,104.68

@ 18 $1,054,598.92

So.... not adding any more to my traditional TSP other than the match... if I can get 18% I'll have over a million in there @50 years old alone...

That way I can draw off that... and leave my Roth to grow... so when we hit 60...we got a HUGE amount of cash we can take out any time we want for whatever we want TAX FREE.

$693 a check is Roth TSP and because TSP only matches with traditional... an additional $263 goes to traditional each check

Right now my Roth TSP balance is @ $6,497

I'm adding $1386 a month...

in 7 years... my balance should be:

@ 12% = $196,099.61

@ 15% = $222,367.87

@ 18% = $253,008.23

Theeeennnn.... I let that sucker build up for almost 10 more years!

[mindofmush]

The SEC has changed the rules this year to allow brokers to settle cash accounts in 2 days instead of the 3 day settlement period.

You can also ask your broker to upgrade your IRA CASH account to an IRA MARGIN account; you won't be able to borrow money for stock purchases or short stocks either (like a normal margin account) but the advantage is instant settlement (don't have to wait the 2 days for trades to settle). I have an IRA MARGIN account with Interactive Brokers but many other brokers offer this service too.

[mmmmmbeer]

The SEC has changed the rules this year to allow brokers to settle cash accounts in 2 days instead of the 3 day settlement period.

You can also ask your broker to upgrade your IRA CASH account to an IRA MARGIN account; you won't be able to borrow money for stock purchases or short stocks either (like a normal margin account) but the advantage is instant settlement (don't have to wait the 2 days for trades to settle). I have an IRA MARGIN account with Interactive Brokers but many other brokers offer this service too.

Does it cost more money to upgrade that?

[Snapdragon]

I have margin for the same reason. Didn't cost anything at Ameritrade

[mindofmush]

Good to know. Isn't there something else about the Roth IRA being established for at least 5 years?

The 5 year limit for tax penalties on the earnings begins in the tax year for which the first "contribution" is assigned. (If you open a Roth IRA by making a contribution in April 2018, you can assign that contribution to 2017 and the 5 year time clock starts on January 2017.)

You can "transfer/rollover from a Roth 401k (Roth TSP) into an existing or a new Roth IRA and the 5 year clock is based on the tax year the Roth IRA is credited to.

If you do a Traditional IRA to Roth IRA "conversion", the 5 year clock begins in the tax year of each "conversion".

mmmmmbeer's plan will not be adversely affected by the 5 year tax penalty clock and he still has the option of withdrawal of "contributions" without penalty if some emergency happens to pop up. There are also ways to withdraw your Roth IRA money before 59.5 without penalty if necessary (IRS pub 575). It looks like a good plan.

[Timber82]

Dumb question. Do roth withdrawls get counted as income?

For example, if I make a withdrawl 40k in a year from roth then 20k from traditional will it get taxed based on 60k or 20k?

[winsprint]

A completely separate five-year rule applies when you convert money in a traditional IRA to a Roth IRA. Here, the rule says that until five years has passed after the conversion, you have to pay the 10% penalty if you withdraw money from the converted Roth and don't qualify for the usual penalty exceptions.
This rule works differently from the first Roth IRA rule in that a new five-year period starts for every Roth conversion you make. But the point of the rule is to prevent you from using Roth conversions to avoid a penalty that would apply to traditional IRA withdrawals. Without this rule, you could convert money to the Roth and then immediately withdraw it without paying the 10% penalty, because converted amounts are generally treated as tax-free when distributed because you included them in taxable income and paid tax at the time of the Roth conversion. This rule closes that loophole.
The five-year period starts running on Jan. 1 of the year of conversion, so, depending on when the conversion takes place during the year, the actual waiting period can be as little as four years and a day. If you turn 59-1/2 during the five-year period, then the penalty no longer applies after that date, even if the five years haven't elapsed.
Ref:
https://www.fool.com/retirement/iras/20 ... ained.aspx

[mindofmush]

Exactly correct and a much better explanation of conversion.

[Matavian]

If you have both Traditional and Roth in the TSP you cannot transfer just the Roth portion out of the TSP into a Roth IRA. It will come out 50/50, and you will pay taxes on the Traditional amount.

[mindofmush]

If you have both Traditional and Roth in the TSP you cannot transfer just the Roth portion out of the TSP into a Roth IRA. It will come out 50/50, and you will pay taxes on the Traditional amount.

If you have both Traditional and Roth in the TSP you cannot transfer just the Roth portion out of the TSP into a Roth IRA. Correct

It will come out 50/50 Only true if your Roth Balance = Traditional balance All withdrawals are pro rata (proportionate)

and you will pay taxes on the Traditional amount Only true if you "convert" your Traditional TSP to a Roth IRA (conversion is unnecessary to move Traditional TSP balance)
The TSP-70, TSP-75 and TSP-77 withdrawal forms allow a direct transfer of Roth TSP to a Roth IRA and Traditional TSP to a Traditional IRA at the same time as a single withdrawal event.
These forms are available on the TSP.gov website and have instructions included. The website also has a pdf booklet about how to withdraw your TSP which includes the example that has led to all the confusion about 50/50.