Leaving the Service - Should I Roll Over?

[grove]

Hello to all,

As the title says, I'm leaving the service very soon and I have a TSP balance in the realm of ~$15k to figure out what to do with. Since I can't contribute to it anymore (I am going to college and thus will not work for the Fed for at least a few years if I decide to go that route), I would think that rolling it over to a Roth (I'm thinking USAA) would be the best thing to do. Does anyone have any reasons why I should stick with the TSP?

Thanks!

 

[luv2read]

Pro leaving it in:

1. If you are a FERS employee and withdraw your retirement funds when you leave federal service and return to federal service in the future, you can't "redeposit" your retirement funds for credit towards your retirement. You have to start all over again from square 1.

2. If you go to work in the private sector and roll your TSP into a 401k, then later go back to work for the government, you can roll that 401k into the TSP. It still isn't a "redeposit", but you can put the whole thing in TSP if you so choose, which you can't do with a Roth.

Against:

The TSP is still a good retirement plan but the IFT limits severely restrict your ability to maximize your returns. Many FERS employees are making TSP loans to fund Roths and private investment accounts and are doing much better managing their funds than the TSP fund manager. There are also no guarantees that the TSP fund is safe if the fund manager goes bankrupt - the contract allows the fund manager to "voluntarily" make up any losses OR TSP account holders can sue if they don't.

 

[grove]

luv2read,

Very interesting. You are saying that I could roll my entire TSP into a 401k, effectively closing my TSP account, and then sometime in the future, go back to work for the gov. and roll my 401k back into the TSP in it's entirety? And this isn't possible with an IRA?

Your point about the IFT restrictions also resonates. It is one of my short-term goals to learn investing such that I can make those transfers and maximize my gains. If that ability is limited with the TSP, I might be better off with USAA.

Maybe I can take a payout of *most* of my TSP and roll it over to the IRA, but leave ~ $1k in the account so it's still open. That way I'd have the option of transferring in a 401k if I ever came back to the Fed.

 

[tsptalk]

Maybe I can take a payout of *most* of my TSP and roll it over to the IRA, but leave ~ $1k in the account so it's still open. That way I'd have the option of transferring in a 401k if I ever came back to the Fed.

I like that idea. Then you can see if trading with 2 IFT's can make $1000 grow.

Welcome to the site!

 

[EW_ret]

You can transfer/rollover some, or all, the money you have in your TSP to a traditional IRA, or a company 401(k). Then if you secure a government job later, you can transfer the funds from the traditional IRA, or 401(K) back ino the TSP. It's true that if you put the TSP money into a Roth IRA, then you cannot transfer that back into the TSP. That could change in the future, if the TSP starts the Roth TSP option.

See Important Information Regarding Transfers From the Thrift Savings Plan to Eligible Retirement Plans. Search for fact sheet OC 94-20.

Also see form TSP-60 which is the request to transfermoney from an traditional IRA or complany plan into the TSP as a government employee.

 

[Guest2]

http://www.tsp.gov/forms/oc94-20.pdf

It will take you to the homepage,,,, then copy & Paste the above link into the address area of your browser. The PDF will come up then.

 

[Guest2]

A few questions comes to mind when I think about taking my money out as well.

Q1- For a guy like me, who trades frequently, What kind of cost would I
incurr with,,,,,say,,,,,,4 transfers per month,,,,,and DCA'ing 4 more times
back into safety. (on a yearly basis). I know it will vary based on what
company I go with, but an average is what I'm looking for.

Q2- If I trandfer a large sum from my TSP into a Traditional IRA, then 3
years later (before 59-1/2) make a lump sum withdraw from the IRA, don't
I have 30days before I find myself in a tax situation.

Q#3- Can't I take that Lump sum and deposit into my Checking Acct and
then Tranfer it back to my TSP if desired. Or even get a Cashiers Check
and send it to the TSP without problems.