401(k) to Roth

[burrocrat]

the new budget legislation allows transfer from tax-deferred to roth if your employer offers both plans. will tsp offer this choice? given recent tax changes and calls for additional tax revenue in the future, would this be a reasonable option?

Budget Deal Lets More Savers Switch to Roth 401(k): Taxes- Bloomberg

 

[alevin]

the new budget legislation allows transfer from tax-deferred to roth if your employer offers both plans. will tsp offer this choice? given recent tax changes and calls for additional tax revenue in the future, would this be a reasonable option?

Budget Deal Lets More Savers Switch to Roth 401(k): Taxes- Bloomberg

for you, it probably would be reasonable, b, given you have 20 years and many more upgrades to go. for ones with not so many more years to go, not so much.

 

[cak165]

TSP examines in-plan conversion option — The President approved the American Taxpayer Relief Act of 2012, on January 2, 2013. This law allows the TSP and other qualified plans to give participants the option to convert their traditional account balances to a Roth balance. The amount converted would be taxable to the participant. We are currently waiting for tax reporting guidance from the IRS and will be studying the actions required to offer a conversion option. After that review, we will make decisions on whether to proceed.

 

[Viva_La_Migra]

TSP examines in-plan conversion option — The President approved the American Taxpayer Relief Act of 2012, on January 2, 2013. This law allows the TSP and other qualified plans to give participants the option to convert their traditional account balances to a Roth balance. The amount converted would be taxable to the participant. We are currently waiting for tax reporting guidance from the IRS and will be studying the actions required to offer a conversion option. After that review, we will make decisions on whether to proceed.

Yeah, they want the tax money now! It's tempting, but it would probably put me in too high of a tax bracket.

 

[k0nkuzh0n]

I can see this being useful for a few types of people:
1- people that didn't have a ROTH option before (Like us, just getting ROTH TSP) and would have liked one
2- people that took a significant paycut
3- If the conversion doesn't count towards ROTH Contributions (No idea if it does or not), it would be useful for people who max out their ROTH Contributions, because now you could convert 401k to ROTH, max contribution to ROTH, and max contribution 401k. (This one is very interesting!)
4- people who regretted putting money into a 401k instead of a ROTH

Otherwise, if you had wanted the money in the ROTH, you should have already put it in the ROTH. Chances are you have a higher taxible income now than you did when you invested the money into the 401k. 'All else equal' it is a lateral move.

 

[nasa1974]

This might be a good idea for those employees that have less than 5 years invested in a standard IRA and want to switch to a ROTH. Otherwise the taxes would be a killer. Now if they only taxed the money being switched over and didn't count it toward your income that would be an incentive. Your tax burden wouldn't increase and put you in a higher tax bracket.