Time to roll TSP over...but where?

Managing your TSP and alternate investment options after retirement or separation from service.

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MakeMe$$$$
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Time to roll TSP over...but where?

Post by MakeMe$$$$ »

Hello Folks!

Being CSRS I didn't take a lot of advantage of TSP so my balance is relatively small at around $32K. Never the less...the last year I have been working on my non-TSP investment strategies and had reasonable success. I've been trading in Vanguard and Fidelity. I prefer Fidelity because the book keeping is much more straight forward with a single account. Vanguard has 2 accounts. One is for Mutual funds, Money markets and sweeps and the other is for ETFs, Stocks and such. Fidelity works pretty darn straight forward with my Quicken while Vanguard is always a PIA to reconcile.

That being said, I'm not shutting Vanguard out of the running. I'm curious to see if anyone on TSPcenter has made the roll over. Where and why did you pick your destination and re-investment choice?

Being 61 I'm not sure that my time line for continued managing an Roth is in my favor. And unless someone can tell me I'm wrong, I'm not sure I want to pay the federal tax out of my current savings to roll into a Roth. Rolling into a traditional IRA keeps the tax man out of the picture. Our income bracket is 25% and we are nearly at the top of it. If I understand the conversion to Roth I would pay the federal tax on the entire amount which nearly all of it would be 28%. That would require about $10.3K out of my savings/investments. If I am misunderstanding the tax implications of TSP to Roth, I'm all ears.

BTW...I'm familiar with the 5 year rule on principle withdrawal. As I see it, if I make 28% return over 5 years then I've recovered my tax to convert but I'm a little concerned about both making those returns and not needing them and paying a penalty during that 5 years. Of course, it would be closer to 4 years since any part of a year counts as year 1.

Rolling into a traditional IRA would be simple and without any tax implications on the roll over. I would still have the entire $32K and change available to manage and if either I or my wife passed away before pulling it out would be done at a lower tax bracket. In the last 2 years my real life, non-TSP return as been 5-6% on average but would have been higher had the last couple months not been so rough.

Anyway...the floor is open.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

crondanet5
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Re: Time to roll TSP over...but where?

Post by crondanet5 »

1. Have you talked to a Fidelity rep about doing a rollover IRA?

2. Do you still feel the motor home was a good idea?

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MLKMAN
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Re: Time to roll TSP over...but where?

Post by MLKMAN »

The main advantage to a Roth is that you can take money out after you turn 59 1/2 without paying taxes or penalties. You are 61 now, so you don't have the advantage of pumping money into it earlier in life in order to avoid paying taxes on it later. Stick with the regular IRA and just pay taxes as you withdraw it.
"We are all faced with a series of great opportunities brilliantly disguised as impossible situations."

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MLKMAN
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Re: Time to roll TSP over...but where?

Post by MLKMAN »

Oops, I almost forgot. One advantage a Roth does have is that it is not mandatory to begin withdrawals at age 70 1/2 like with a regular IRA. This means if you don't need the money and want to leave it for your children, the Roth is the way to go.
"We are all faced with a series of great opportunities brilliantly disguised as impossible situations."

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MakeMe$$$$
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Re: Time to roll TSP over...but where?

Post by MakeMe$$$$ »

crondanet5 wrote:1. Have you talked to a Fidelity rep about doing a rollover IRA?

2. Do you still feel the motor home was a good idea?


HELLO Cron!

1. I'm emailing back and forth with both Vanguard and Fidelity. Not hearing anything earth shattering from either. I'm probably focusing on Fidelity & Vanguard because of the full service aspect instead of some other place that isn't a full service broker.

2. ABSOLUTELY! We have found that we are living a slightly more cost effective life style compared to when we owned the sticks & bricks home and enjoying life more fully. Certainly being retired is part of that feeling. While a MH is a depreciating asset, so is my body. LOL We think we will run out of money just about the time we reach our terminal depreciation value.

We have put on over 20,000 miles in 2 years and getting ready for our southerly trek from Champaign, IL to Mc Allen, TX via Lakeland FL. Along the way we get to visit family, scout out potential FL snowbird locations for future reference and just visit more places. We get to carry our 7 monty old German Shepherd Pup (lost 2 adult GSDs this summer :( ), sleep in our own bed, fix our own meals, watch our own DirecTV and change our scenery when we feel like it. Next year we will take a grand tour of the western part of the country when we depart St. Charles, MO with 19 other RVers and follow the Lewis and Clark trail until we get to Portland, OR. From there we will drift towards some place in AZ via SLC, UT then Pueblo, CO followed Albuquerque NM (Ballon Fest) and then float around AZ for the winter.

The full time RV life style isn't for everyone but it has been a great experience for us.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

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MakeMe$$$$
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Re: Time to roll TSP over...but where?

Post by MakeMe$$$$ »

MLKMAN wrote:The main advantage to a Roth is that you can take money out after you turn 59 1/2 without paying taxes or penalties. You are 61 now, so you don't have the advantage of pumping money into it earlier in life in order to avoid paying taxes on it later. Stick with the regular IRA and just pay taxes as you withdraw it.


Ya...that is what I was thinking and some more reading after I posted this thread basically said the same. In short, unless we had a much longer life expectancy and/or still working enough to contribute to it, the Roth's advantages would probably not be enough to overcome the initial tax shock.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

crondanet5
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Re: Time to roll TSP over...but where?

Post by crondanet5 »

I know Fidelity offers 24/7/365 access to human broker/representatives. Does Vanguard?

JDD4J4J
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Re: Time to roll TSP over...but where?

Post by JDD4J4J »

I'm sure if you spoke with representatives from Vanguard or Fidelity or any financial planner they would advise you to rollover your TSP.  I mean none of them can offer you any services or make any money unless you do.  Dave Ramsey, akin of financial advisors and who has never been a federal employee, advises you to Rollover your TSP.  Generally they list the same advantages: Full control of investments, More investment options, Ability to control fees, and Portability.

Another reason to roll your TSP balance into a traditional IRA is because once you leave federal service you cannot contribute to it any longer. After leaving federal service your TSP balance’s growth is dependent on the gains of your holdings alone and not from future contributions. If you roll the balance into a traditional IRA you can continue contributing to it. Also, depending on the type of vehicle (mutual funds, stocks etc.) you fund your traditional IRA with…you can take advantage of even more balance growth via capital gains and dividends being reinvested into your holdings.

However, there will still be Minimum Required Distributions with a traditional IRA's.  And although a former federal employee cannot continue to make employee contributions, they can transfer eligible money into the TSP account from IRAs and employer retirement plans that may be eligible.

I can understand wanting more investment options.  Though if you know how to use them the TSP funds can offer good returns. The one fund I do feel TSP is missing is a P Fund, Precious Metals Fund.

When it comes down to it, the TSP has some of the lowest expense ratios in the investment industry and you will be hard pressed to find mutual funds with expense ratios that low. Additional benefits to leaving your assets in the TSP. You won’t be charged any additional fees to leave your funds in the Thrift Savings Plan (plan expenses still apply), and it won’t affect any of your other investments, or ability to open other retirement accounts.  

As TSP has the lowest fees and expenses,  the ability to control fees just ends up meaning the freedom to pay more.  It's not as much about return from your money as it is return OF your money.  Setting up investments to continue contributing after retirement makes sense, though that doesn't require rolling over your TSP.  It seems more advantageous for an individual to leave their funds where they are safe and secure, rather than moving them where there are large fees and higher risk.

Scott Burns, a financial writer, made this observation with regard to pulling money out of the TSP upon leaving federal service: “It does not make sense for the vast majority of government employees most of the time. The reason for this is simple: there is no way that you can replace either the safety of the government bonds fund or the low cost of the low cost index funds with a product available in the private market.”

crondanet5
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Re: Time to roll TSP over...but where?

Post by crondanet5 »

Good points, the most important being accessibility if you need your money before minimum withdrawal time arrives. As I understand it, there is a very tiny opaque window in which you can change your monthly TSP withdrawal amount. You miss it, you are stuck until the next year. Beside that awful situation, what if you wanted to withdraw a couple thousand dollars every few months to cover unanticipated expenses? In Fidelity you can withdraw cash anytime you want. I don't know Vanguard because I don't like them. These comments echo JDD4343's concern about accessibility. TSP is a congressionally mandated program enabling federal employees the opportunity to enrich their financial retirement condition. Once federal employment terminates, so should your TSP participation.

JDD4J4J
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Re: Time to roll TSP over...but where?

Post by JDD4J4J »

Once they become one, majority are going to stay a federal employee or annuitant for life.  The exception would be the small few who leave federal employment to work in the private sector without being vested.  As well as those who have a military TSP and then go into the private sector when they get out without retiring.  But to me, even then, once someone has the advantage of being able to participate in something 'members only' at so low cost, I personally don't see the point of ever giving it up.  That's like canceling your great account at Navy Federal because you're no longer in the Navy.

Based on anecdotal evidence, some federal retirees no longer feel as proud of being a member of the federal workforce. Many earlier federal employees were more inclined to have higher morale, proud of what they had accomplished, and felt more respected as a contributor to American society than more recent retirees. In other words, working for the federal government is not as “cool” as it once was and some retirees reflect this attitude by choosing to place a greater distance between their money and their former employer.

The Thrift Savings Plan commented on the issue of leaving money in the TSP or withdrawing from the TSP as reported in various publications. Gregory Long, the plan’s executive director, wrote in a memo to board members that, “Swayed by the financial industry’s marketing efforts,” Thrift Savings Plan members “have become an even more popular target” for companies luring them into higher-cost IRAs.

Taking your money out of TSP just seems to be a way for other people to make money.  The withdrawal options do require planning, however I believe it to be much more worthwhile and fruitful planning then the extensive amount it would take to attempt to make "rolling over" profitable. 

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Pocono13
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Re: Time to roll TSP over...but where?

Post by Pocono13 »

Once you leave the TSP, you can't go back. Be sure that is what you want to do. I prefer the versatility of many options.

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MakeMe$$$$
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Re: Time to roll TSP over...but where?

Post by MakeMe$$$$ »

JDD4J4J wrote:...
Taking your money out of TSP just seems to be a way for other people to make money.  The withdrawal options do require planning, however I believe it to be much more worthwhile and fruitful planning then the extensive amount it would take to attempt to make "rolling over" profitable. 


I am certainly convinced that rolling over into a ROTH would be extensive in cost. Rolling over to a traditional IRA has no cost if rolling into a no fee provider like Fidelity. Of course, you are correct in the aspect that TSP is as low cost as they come but the limited options seem to be too restrictive compared to non-TSP options. Also, depending on whether I stick to mutual funds vs ETFs/Stocks, I would see different additional costs to manage an IRA.

So, if I roll, it will be traditional. I've spent a fair amount of time over that last year on my non-TSP stuff and kind of ignored TSP so I am going to give myself a little time to see if I can maximize my TSP returns in comparison to my other investments. Since I'm ruling out the Roth, when I roll over isn't as critical so a few more months might be in order before I make a final decision.

Thanks for your thoughts.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

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MakeMe$$$$
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Re: Time to roll TSP over...but where?

Post by MakeMe$$$$ »

Pocono13 wrote:Once you leave the TSP, you can't go back. Be sure that is what you want to do. I prefer the versatility of many options.


With my recent experience with non-TSP trading...I like the versatility and thus my planning to make that decision smart for me.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

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MakeMe$$$$
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Re: Time to roll TSP over...but where?

Post by MakeMe$$$$ »

I've reset my Fantasy TSP in order to better track my current strategy used to manage my real TSP. I had let my fantasy updates slip for that last few months. Let's see where it goes.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

crondanet5
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Re: Time to roll TSP over...but where?

Post by crondanet5 »

I disagree with the above comments extolling the cheapness of the TSP Program. The Prime Directive in retirement is access to your money. That is hard to do under TSP rules. Read them. Talk to a TSP counselor. Explore the question of three unplanned withdrawals in a year. Can you do it? Better to roll it out and have access than save a few pennies and not be able to get your money out when you want. Conservation of assets and accessability are the key issues here. You can't get your money out once you have started a 70 1/2 withdrawal program. Can everybody understand this? Take the money and run to Fidelity or Vanguard, invest it wisely, withdraw it when deemed prudent.

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