In dire need of guidance!

[LEED3D]

Hello All - just recently discovered the community here so this is my first post!

Quick background on myself: I'm 26 years old, graduated from college in 2007. I was employed with a government contractor from 2007 until late March of 2011. I contributed to my 401k with the company from day 1 and reached 36k. I am now employed with a federal agency and enrolled in the TSP program. I called my former employer and asked if they could transfer my 401k to my TSP and I was told no. They said they could only transfer money into accepted plans and TSP was not one of them? The lady also told me that I have about 19k in my account as "after tax" and 17k as "pretax". Apparently I chose to have my 401k savings be after tax but the company matches were pretax. Yea, I'm a little lost... haha

What's my best move here? Do I transfer all the money into a Roth IRA? Is there anyway to put this money into my TSP? I'm assuming there will be some type of caveat that comes with my retirement savings for the 19k stating I've already paid taxes on that money so I won't be nailed twice?

Also can someone provide me some insight on why "tax-deffered" is so beneficial? Why does it matter whether I pay taxes on my retirement now or when I withdraw the money? I'm still going to be paying 30% ( or whatever tax bracket I'm in) on the overall savings anyways right?

Sorry for all the questions. I feel I'm a pretty good money manager at my age ( also have close to 70k invested in the stock market) but I get really confused on retirement plans and taxes.

Thank you so much in advance!

Lee

 

[jpcavin]

LEED

I assume you can leave your money where it is or you would get two separate distributions, one pre-tax and one post-tax to reeinvest. Here is the forms you need for your pre-tax portion. I assume you need to have a Roth IRA for the post-tax portion. I'll leave the explanation to the experts on this board.

https://www.tsp.gov/PDF/formspubs/tsp-60.pdf

 

[SkyPilot]

https://www.tsp.gov/planparticipation/transfers/methods.shtml

 

[RealMoneyIssues]

I was told once that TSP can only roll specific plans. I was going to have to roll my 401k into a self directed IRA then transfer that to TSP. I haven't done the second step yet, but maybe that is the issue.
More than likely the previous 2 posts have answered your question, but just thought I would add my 2 cents.

Welcome to the board !!!

 

[tsptalk]

Also can someone provide me some insight on why "tax-deffered" is so beneficial? Why does it matter whether I pay taxes on my retirement now or when I withdraw the money? I'm still going to be paying 30% ( or whatever tax bracket I'm in) on the overall savings anyways right?

Welcome Lee!

The difference is when you withdraw your money from a tax defferred account, all of the amount is taxable. But you can deduct the amount of the deposits from your current tax liability.

If you do a Roth type IRA, only the amounts of you deposits are taxable (at the time of the deposit) and when you withdraw the money there are no tax liablities. That means ALL of the earnings you made in your account - and when you get older that could very well be more than you have deposited over the years - will be withdrawn tax free.

 

[LEED3D]

Thank you all! I appreciate the clarity, definitely makes a lot more sense now. I was thinking I could transfer my post tax savings into a Roth IRA. However, I don't know what I should do with the pre-tax distribution asas apparently my previous employer doesn't allow for 401k transfers into a TSP. Any thoughts?

Thanks again!

 

[RealMoneyIssues]

Thank you all! I appreciate the clarity, definitely makes a lot more sense now. I was thinking I could transfer my post tax savings into a Roth IRA. However, I don't know what I should do with the pre-tax distribution asas apparently my previous employer doesn't allow for 401k transfers into a TSP. Any thoughts?

Thanks again!

I think you can transfer to a self directed IRA, then once that happens, transfer it to TSP.

 

[jpcavin]

However, I don't know what I should do with the pre-tax distribution asas apparently my previous employer doesn't allow for 401k transfers into a TSP. Any thoughts?

Thanks again!

I would verify that. I'm not sure it's up to your employer. :blink:

 

[Birchtree]

I would not transfer any type of IRA into TSP - why such a rush. You've got plenty of time to build a TSP base.

 

[jpcavin]

You cannot move money from a Roth 401(k) (after tax) account into your TSP account but you can move your pre-tax into your TSP.