Traditional TSP Rollover to Traditional IRA

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

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jethro
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Re: Traditional TSP Rollover to Traditional IRA

Post by jethro »

mindofmush wrote:(Remember to transfer Roth TSP to a Roth IRA before 70.5 age to avoid the minimum required withdrawls.)


If a person has both Roth and Traditional components in their TSP, can they choose to only transfer one component or the other?

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evilanne
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Re: Traditional TSP Rollover to Traditional IRA

Post by evilanne »

jethro wrote:
mindofmush wrote:(Remember to transfer Roth TSP to a Roth IRA before 70.5 age to avoid the minimum required withdrawls.)


If a person has both Roth and Traditional components in their TSP, can they choose to only transfer one component or the other?

No, everything is done propotionally. You can transfer almost all out, leaving account open & then transfer the regular TSP funds back in. I think there is a way to transfer TSP Roth money directly into a Roth IRA from monthly payments or lump sum withdrawal.

mindofmush
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Re: Traditional TSP Rollover to Traditional IRA

Post by mindofmush »

The TSP currently offers only 2 lump sum withdrawals/transfers:
A Partial withdrawal (before or after retirement)
A Full withdrawal (which closes the account)

If you want to transfer almost all out, leaving the account open then you effectively have only 1 lump sum withdrawal/transfer available.

If you have a Roth TSP, then you have both Roth & Traditional TSP. You must provide account info for both a Roth IRA and a Traditional IRA for the TSP to transfer your money.

Monthly payments from either Roth TSP or Traditional TSP are considered "withdrawals" not "transfers" and are limited to annual IRA contribution limits ($5500/$6500) and assuming earned income greater than contribution.
mo meng, mo ching (which loosely means: no money, no life)

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evilanne
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Re: Traditional TSP Rollover to Traditional IRA

Post by evilanne »

mindofmush wrote:If you want to transfer almost all out, leaving the account open then you effectively have only 1 lump sum withdrawal/transfer available.
...
Monthly payments from either Roth TSP or Traditional TSP are considered "withdrawals" not "transfers" and are limited to annual IRA contribution limits ($5500/$6500) and assuming earned income greater than contribution.

Monthly or Life expectancy monthly payments fall under the full withdrawal, but it doesn't close out the account. With life expectancy payments the monthly amount is based on 31 Dec balance divided by age factor (if doing IAW 72t, you must stay with this for 5 years or 59.5, whichever is later), but it can be change to monthly payments later. With monthly payments, you can change the amount annually, if you want to close the account you can roll over the remaining amount to IRA.

Last statement is incorrect, as you can rollover 100% of the Roth portion of monthly payments to a ROTH IRA. If you don't select this option then it would be considered a withdrawal. Annual contribution limit is not relevant since TSP balance is not considered earned income.
See TSP-70 Form https://www.tsp.gov/PDF/formspubs/tsp-70.pdf
XI. YOUR TRANSFER ELECTION FOR ROTH BALANCE—After you complete this section, take or send this page (including the instructions on the back) to your IRA or plan. Your IRA trustee or plan administrator must complete Section XII. You must submit the completed package in order for your transfer to be processed.
...46. MonthlyPayments. Indicate %age of your Roth monthly payments that you want to transfer: ____

XII. TRANSFER INFORMATION FOR ROTH BALANCE

mindofmush
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Re: Traditional TSP Rollover to Traditional IRA

Post by mindofmush »

You are right, evilanne, that you can elect your monthly payments to "transfer" to an IRA but the TSP has a Catch-22 for early retirees trying to access your TSP money -- your monthly payments are not eligible for transfer if you select Life Expectancy monthly payment amount.

From tsp-70.pdf

SECTION V. TRANSFER ELECTION. Check the box in this section if
you want all or a part of the single and/or eligible monthly payments
you elected in Section IV to be transferred to an IRA or eligible employer
plan. In order for a monthly payment to be eligible for transfer,
it must be of a fixed dollar amount that results in payments that are
expected to be completed in less than 120 months. You cannot transfer
monthly payments expected to last 120 months or more, or those
that are computed based on your life expectancy.

Looks like they don't want you to take your money out of the TSP. (Congress needs it to balance the budget.)
mo meng, mo ching (which loosely means: no money, no life)

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evilanne
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Re: Traditional TSP Rollover to Traditional IRA

Post by evilanne »

Good to know for anyone who plans to retire prior to 55 (or 50 for LEOs). All my contributions are traditional so this doesn't really impact me.

What does impact me is that I have to do a partial withdrawal prior to taking life expectancy payments for the amount I want to eventually convert to Roth, which is more restrictive than the actual IRS rules. When I talked to TSP, I expressed my displeasure with this restriction--especially considering their campaign for people to stay with TSP after they retire. I am willing to work around it because staying with TSP is more advantageous considering the other options. (I don't want to do the extra work that would be required for life expectancy payments if I were to roll all over to discount brokerage or pay higher fees of an outside managed account)

It will be interesting to see how they change the withdrawal rules.

I don't think the amount in TSP has anything to do with the likelihood that congress will ever balance the budget or not :?

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alphaalpha
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Re: Traditional TSP Rollover to Traditional IRA

Post by alphaalpha »

Hello, what is the process for rolling over TSP to an IRA. I have a Vanguard account and want to do a partial rollover. I don't readily see this on the official TSP site.

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mjedlin66
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Re: Traditional TSP Rollover to Traditional IRA

Post by mjedlin66 »

alphaalpha wrote:Hello, what is the process for rolling over TSP to an IRA. I have a Vanguard account and want to do a partial rollover. I don't readily see this on the official TSP site.
I believe you want the TSP-99 form, which is actually called a withdrawal. The TSP website wants you to login to your account at tsp.gov, then go to Online Transactions > Withdrawals and Changes to Installment Payments. You want the form on the right side, "Withdrawal Request for Separated and Beneficiary Participants".

Some information can be found here on page 4:
https://www.tsp.gov/publications/tspbk02.pdf

And more information here:
https://www.tsp.gov/publications/tspfs05.pdf
Owner/creator of TSPcalc.com - "Know your numbers"

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alphaalpha
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Re: Traditional TSP Rollover to Traditional IRA

Post by alphaalpha »

Thanks! So I will have to withdraw the money and then deposit into my Vanguard rather than a direct rollover into Vanguard. I had the impression from Vanguard they would handle the rollover once I completed a TSP form. It now sounds I will have to have TSP send the money to me and I then deposit into my IRA?

crondanet5
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Joined: Tue Aug 19, 2008 8:51 pm

Re: Traditional TSP Rollover to Traditional IRA

Post by crondanet5 »

alphaalpha call TSP to get the right procedure. That will avoid unnecessary capital gains taxes and withdrawal penalties.

clifbeliev
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Joined: Tue Jun 26, 2018 10:29 pm

Re: Traditional TSP Rollover to Traditional IRA

Post by clifbeliev »

If you handle the funds then ALL funds are taxable for that year. Transferring from a 401K to Ira is nontaxable if you never touch the funds and tsp sends them directly to your institution's IRA.

Sig
Posts: 26
Joined: Tue Apr 21, 2009 7:31 am

Re: Traditional TSP Rollover to Traditional IRA

Post by Sig »

alphaalpha,
Open your Vanguard IRA account first and have Vanguard fill out the transfer paperwork. TSP will send the check to your Vanguard account.

Scarfinger
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Re: Traditional TSP Rollover to Traditional IRA

Post by Scarfinger »

Let us know what happens. I have heard other members had some difficulties.
I am just an average Joe. I have no clue to what the market will do.
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