Retirement from the Military

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

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Re: Retirement from the Military

Post by evilanne »

ND_Steel wrote: Am I missing something?

Based on these numbers, I am leaning to doing a direct rollover. While I understand the concepts of playing the probabilities in TSP, it is still a bit stressful and risky to me. I have tried to follow a plan a little, but if my move out of stocks according to the plan hasn't gone my way I find it difficult to jump back in at a higher price...thus abandoning the plan in hopes that the market drops (that's where I'm at China deal for the time being please ;)).

Would a direct roll over have an tax implications or would it simply be still designated as a 401k tax-deferred (as most of my TSP is traditional)? Some of it is tax-exempt from contributions in a war zone. How is this taken into account? Probably questions for T Rowe and TSP, but appreciate any objective opinions from the knowledgeable here as well.

Sorry, a lot above to digest...always appreciate your conversations and thoughts.
I think you are going to have same issues following any plan whether it is TSP or in an outside IRA.

A Trustee to Trustee rollover has no Tax Impact. You just do not want them to send you a check. If you decide to rollover, suggest you follow ArrieS advice of leaving a small amount in TSP so you can go back to the TSP later if the grass isn't greener on the other side.
--If you have any after tax money in Military account, that cannot be combined with Civilian account. If you do have after tax/deployment money, you need to make sure to document that in any new account or see if it can be separated into a Roth Account.

--Based on your age, you will be limited on how you can access you TSP or IRA money without 10% penalty before you reach 59.5. To avoid penalty, funds must qualify for exception--most common would be SEPP or life expectancy payments that is based on your account balance and age.

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Re: Retirement from the Military

Post by evilanne »

For tax exempt contributions made before Roth accounts were available--it may be complicated. Currently your earnings on your deployment contributions to TSP will not be tax free as it is in a Roth TSP or IRA. You may need to talk to more than one person at TRowe or another investment company to find someone that will transfer tax exempt money into a Roth. Basically you would have them set up a traditional and Roth account and do partial transfer and they would need to put the appropriate amount in each account. Alternatively it could go into one account and they could transfer the tax exempt money into a Roth via a partial conversion. If they put $0 in block 2a of the 1099-R for taxable amount for the conversion, there should be no tax consequence (whether or not they would do this, I would find out in advance). Financial companies also have a lot of red tape.

Here is something I found along the same lines: ... -roth-ira/
Note: There is always a risk that it could be questioned or disallowed.

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Re: Retirement from the Military

Post by crondanet5 »

Thanks for the post evilanne. Your information is more current than mine.

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