DShell's account talk

[DShell]

SMART OR DUMB? I have been invested in pretax TSP for 22 years. Last year I bumped it up to 20% and went after tax ROTH. I was thinking that in retirement, I could tap the ROTH portion when needed to avoid going into higher tax bracket.

I did this in my wifes 401K at her employer also. I just realized that is not how it works. The amounts are not separate.

For the first time in history we owed a grand in taxes.

What is your opinion?

 

[userque]

What is your opinion?

Take her out to dinner...someplace real nice.

 

[DShell]

Seriously, anyone have an opinion on advantages or disadvantages of switching fully to Roth late in career with 5 years to go?

 

[tsptalk]

Welcome DShell. I assume you will be in a lower tax bracket when you retire than you are now? If that's the case you might want to stick to differed. If you were 25 than it would be a different story, but you are probably near your peak income now.

But I am not very knowledgeable in retirement strategies. If you pose this question in the Retirement thread it may get more attention and responses.

http://www.tsptalk.com/mb/retirement-and-ira-talk/

Also, try the search feature. It may have been asked before... Google Custom Search / http://www.tsptalk.com/mb/search.php?searchid=1029385

Good luck!

 

[Birchtree]

Your TSP is a deferred comp plan and will be taxed at your taxable rate when you reach required minimum distribution at 70 1/2. Roll the money over to an IRA of the traditional type and there will be no tax until you reach RMD time. Before that time arrives begin the slow process of rolling into a Roth IRA paying the tax as you move along - just take your time. Then you can set up an income stream in both accounts and make money that is tax deferred. The Roth IRA is great for heirs and there is no RMD for you - plus there is no IRS paper work to diddle piddle with. This is my plan for my wife when I can get her out of the saddle.

 

[Birchtree]

I'm back with a reminder that you should keep good control of your adjusted gross income (AGI), that will determine your lifestyle for taxes going forward - hell it even impacts any capital gains you may make. Anything over +$25OK and you are hit with a surcharge of 3.8%.

 

[nnuut]

Welcome to the Forum DShell!
Best of luck with your TSP!
Norman

 

[Maricar19]

SMART OR DUMB? I have been invested in pretax TSP for 22 years. Last year I bumped it up to 20% and went after tax ROTH. I was thinking that in retirement, I could tap the ROTH portion when needed to avoid going into higher tax bracket.

I did this in my wifes 401K at her employer also. I just realized that is not how it works. The amounts are not separate.

For the first time in history we owed a grand in taxes.

What is your opinion?

Welcome DShell, unfortunately traditional or roth tsp has a combined max. Last year was $17.5 k and if you're over 50 years old, you are allowed to do a catch up. Sorry, you had to pay a grand. This year it's $18k and 5.5k for catch up.

 

[Maricar19]

Seriously, anyone have an opinion on advantages or disadvantages of switching fully to Roth late in career with 5 years to go?

If you are retiring before 59 1/2 and you intend to make withdrawals before 59 1/2, then it might not be wise to switch to a Roth- penalty will apply. You need to be 59 1/2 and at least 5 years vested.

 

[DShell]

Thank you, Moderator, for the "retirement and ira talk" suggestion. I think THAT is the place for this!