TSP Roth to Fidelity Roth IRA

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

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Scarfinger
Posts: 615
Joined: Mon Jan 30, 2012 12:00 am

Re: TSP Roth to Fidelity Roth IRA

Post by Scarfinger »

Scarfinger wrote: Fri Mar 19, 2021 6:01 pm
fish8me wrote: Fri Mar 19, 2021 12:46 pm I've subscribe to you guys thread as I'm looking to the the same... I've just retired at 54 on (12/31/2020) and I want to transfer half of my TSP to a Fidelity Roth IRA. I've opened and account in Fidelity and have lifted the "hold" on my TSP so that I've can do rollover. I understand that the TSP form is valid for 60 days from the print date and has to be notarized on my side and signed by the receiver of the funds before returned to the TSP folks. My question is whether this can be rollover to a Fidelity Roth and withdrawable upon in 5 years when I'm 59.5??? Thanks for covering this subj...
Those are great questions and I don't know the exact right answer.

From Investopedia:
If funds are rolled over from a Roth 401(k) to an existing Roth IRA, the rolled-over funds inherit the same timing as the Roth IRA. That is, the holding period for the IRA applies to all of the funds in the account, including those rolled over from the Roth 401(k) account.

If you do not have an existing Roth IRA and need to establish one for purposes of the rollover, the five-year period begins the year the new Roth IRA is opened, regardless of how long you have been contributing to the Roth 401(k).3


That is why I opened a Roth IRA account now to meet the 5 year waiting period. But, you can always withdraw your principle from a Roth IRA at anytime. I am pretty sure that includes Roth 401K to Roth IRA. Traditional 401K to Roth IRA may have more restrictions.

It looks like the answer to your questioned would be YES.
I am just an average Joe. I have no clue to what the market will do.
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Scarfinger
Posts: 615
Joined: Mon Jan 30, 2012 12:00 am

Re: TSP Roth to Fidelity Roth IRA

Post by Scarfinger »

Scarfinger wrote: Fri Mar 19, 2021 6:03 pm
Scarfinger wrote: Fri Mar 19, 2021 6:01 pm
fish8me wrote: Fri Mar 19, 2021 12:46 pm I've subscribe to you guys thread as I'm looking to the the same... I've just retired at 54 on (12/31/2020) and I want to transfer half of my TSP to a Fidelity Roth IRA. I've opened and account in Fidelity and have lifted the "hold" on my TSP so that I've can do rollover. I understand that the TSP form is valid for 60 days from the print date and has to be notarized on my side and signed by the receiver of the funds before returned to the TSP folks. My question is whether this can be rollover to a Fidelity Roth and withdrawable upon in 5 years when I'm 59.5??? Thanks for covering this subj...
Those are great questions and I don't know the exact right answer.

From Investopedia:
If funds are rolled over from a Roth 401(k) to an existing Roth IRA, the rolled-over funds inherit the same timing as the Roth IRA. That is, the holding period for the IRA applies to all of the funds in the account, including those rolled over from the Roth 401(k) account.

If you do not have an existing Roth IRA and need to establish one for purposes of the rollover, the five-year period begins the year the new Roth IRA is opened, regardless of how long you have been contributing to the Roth 401(k).3


That is why I opened a Roth IRA account now to meet the 5 year waiting period. But, you can always withdraw your principle from a Roth IRA at anytime. I am pretty sure that includes Roth 401K to Roth IRA. Traditional 401K to Roth IRA may have more restrictions.

It looks like the answer to your questioned would be YES. Even if you are transferring from a traditional 401K you would meet the qualified distribution requirements for "earnings" without a penalty, 5 year old account and 59.5 years old
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
Following Daily Seasonal # 139921 as a general guideline.

fish8me
Posts: 12
Joined: Thu Jan 07, 2016 10:36 am

Re: TSP Roth to Fidelity Roth IRA

Post by fish8me »

Thanks Scarfinger,,,I have one of FIDELTY's office close to be and I'm tempted to set meeting with one of their advisors to ask these questions and several others that I have... I'm a little novice at this and I don't want them to circle me like sharks wanting everything that I've saved up to retirement. But I'm think that I will go.

I'm also watching the other thread waiting to hear back from Alphalpha on the correct way on initiating this rollover... or is it a transfer??? I've been following the Chris Barfield newsletter and I want to mimics the "Barbell Strategy" were I will still be able to withdraw from my TSP from 54 to 59.5 (LEO) and transfer the other half to FIDELITY were it should be able to grow faster and then transfer yearly back to the TSP to replace my month withdrawals till I'm 59.5 were I'll just transfer all to fidelity and withdrawal from there.

I should have been ready for this, but procrastination beat to to it.

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bloobs
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Re: TSP Roth to Fidelity Roth IRA

Post by bloobs »

To be clear, If you're rolling over from a Regular (non Roth) TSP to a Fidelity Roth, then you would be assessed a 10% penalty Plus the regular income tax if you withdraw within 5 years or are under 59.5 yrs old--since you havent paid taxes on both your contributions and earnings prior to the rollover.
Anger and intolerance are the enemies of correct understanding.
― Mahatma Gandhi

If it's a choice between a difficult truth and a simple lie, people will take the lie every time. Even if it kills them.
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bop
Posts: 24
Joined: Sun Jun 03, 2018 10:41 pm

Re: TSP Roth to Fidelity Roth IRA

Post by bop »

One thing to consider is you cannot transfer funds from an outside Roth IRA account back into the TSP. If you are going to follow the "barbell" strategy of moving a percentage of your money out to Fidelity with the intention of moving it back to the TSP G fund at a later date, you must use a traditional IRA at Fidelity.

In addition, transferring traditional TSP funds to an outside Roth IRA is a taxable event and you would need to make sure you have the cash on hand to pay the increased tax bill for the year of the transfer.

Transferring traditional TSP funds to an outside traditional IRA is not a taxable event, so you could still implement the strategy, just not with a Roth IRA.
The lyf so short, the craft so long to lerne. - Geoffrey Chaucer

fish8me
Posts: 12
Joined: Thu Jan 07, 2016 10:36 am

Re: TSP Roth to Fidelity Roth IRA

Post by fish8me »

Thanks "bop" sounds like you've done your homework... I'm considering such transfer to a FIDELITY IRA. As I understand this is a "transfer" (TSP to FIDELITY) a "rollover" is when you move money back into the TSP from FIDELITY IRA... the latter of the two, is not a taxable event till the money is removed from the TSP and taxed as earned income at the of the year. Correct???
I am closing the door on moving into a ROTH IRA since its a taxable event.

bop
Posts: 24
Joined: Sun Jun 03, 2018 10:41 pm

Re: TSP Roth to Fidelity Roth IRA

Post by bop »

You can move money from TSP to IRA by a rollover or a transfer.

A rollover is when you take a cash withdrawal from one retirement account and then deposit the same amount into another retirement account within 60 days. The problem with a rollover is the custodian may withhold 20% of your withdrawal for income tax. If you don't redeposit the same amount as your withdrawal, the difference would be taxable. So you would have to come up with that 20% from your cash reserves to complete the rollover without a tax hit.

A transfer is when you ask the custodian to transfer funds directly to a new retirement account. This is the simplest way to move money between accounts. As long as you are going from one tax-deferred account to another tax-deferred account (traditional TSP to traditional IRA or vice versa), a transfer is not a taxable event; and since you never actually took possession of the cash, the custodian is not required to withhold 20% for taxes.

The IRS uses the term "conversion" to describe the transfer of funds from a traditional IRA (or TSP) to a Roth IRA. Converting tax-deferred funds from an IRA, SEP, SIMPLE, or 401k-type account to a Roth IRA is a taxable event.

Full disclosure:
Converting to a Roth IRA gets a bit more complicated if your IRAs hold a combination of tax-deferred and non-tax-deferred contributions. IRS rules require conversions to be treated as taken proportionally from each type of taxable contribution, even if they are not in the same IRA. This scenario can be tricky to report on your tax return, so research this more in advance or consult with your tax preparer if you are thinking about making such a conversion.
The lyf so short, the craft so long to lerne. - Geoffrey Chaucer

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Fund Prices2021-04-16

FundPriceDayYTD
G $16.56 0.00% 0.34%
F $20.66 -0.21% -2.53%
C $62.57 0.36% 11.92%
S $83.28 -0.04% 12.24%
I $38.19 0.63% 7.92%
L2065 $13.71 0.39% 10.49%
L2060 $13.71 0.39% 10.49%
L2055 $13.71 0.39% 10.49%
L2050 $27.99 0.31% 8.45%
L2045 $12.79 0.29% 7.92%
L2040 $46.72 0.27% 7.42%
L2035 $12.36 0.25% 6.82%
L2030 $41.20 0.23% 6.25%
L2025 $11.71 0.18% 4.93%
Linc $22.82 0.08% 2.45%

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