Rolling over from TSP to Vanguard

[Faulk28]

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I have about $30K in bonuses coming to me. What I'd like to do is have them desposited into my TSP account. After this, I want to transfer the money into my Vanguard 401K. Because I'm going from 401K->401K there are no tax penalities AFAIK. Can I do this? Do I have to wait until I leave the service to do this? There is no way I'd ever trust the government with my investments.

 

[tsptalk]

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Welcome Faulk. Thanks for joining us! I'm not too sure about this one. I know there are some catch up contributions you can make if you are 50 (?) or over but I don't believe you can deposit $30,000 into your TSP that didn't come a retirement account. Someone please correct me if I'm wrong.

Thanks,
Tom

 

[Rolo]

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Faulk28 wrote:

I have about $30K in bonuses coming to me. What I'd like to do is have them desposited into my TSP account.

SRB or CSB/REDUX? You will have to ensure your TSP contributions are set through MyPay.

Tom is correct, you cannot have the full $30K deposited at once. The IRS maximum is $12.5K per year,and this includes monthly contributions. If possible,spliting your bonus over three years would circumvent the limit, and taxes.



Faulk28 wrote:

After this, I want to transfer the money into my Vanguard 401K. Because I'm going from 401K->401K there are no tax penalities AFAIK. Can I do this? Do I have to wait until I leave the service to do this?

I didn't see anythingin myquick lookattsp.gov; I would call them and ask directly and get specifics.

With regular IRA transfers, you must specify no tax withholding when youwithdraw everything and you must have your cash in another IRA within 30 (or is it 60?) days.

Faulk28 wrote:

There is no way I'd ever trust the government with my investments.

I hear ya--I am a devout believer in that the private sector will always outperform the State. <plug>*cough*schoolvouchers*cough*</plug>

However, I believe Barclay's handles the investments and the Government merely provides what it does best: rolls of red tape and a bounty of beuracracy. :?

 

[Frizz B.]

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I am looking into doing my own trading online. Scottstrade is $7 a trade. You can use the exact funds as the TSP uses. You will have to pay any capital gains upfront, but you will not have to wait till retirement to use it. I would love to play with$30,000, with something I am going to call (now Money)

 

[Rolo]

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The primary goal should be to avoid paying taxes on that $30K, otherwise it is only ~$22.5K, a 25% loss.

 

[Faulk28]

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Are you sure about that yearly cap for contributions? The military TSP sign up form just says what percentrage of your bonuses do you wanted deposited. Is this in writing anywhere?I wonder if they police this or is this one of those deals where they would deposit the 30k in TSP but force you to pay tax.

 

[tsptalk]

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I don't know anything about the redux bonus so I'll post this link again...

http://www.dod.mil/militarypay/retirement/calc/03_redux.html

Military folks, please chime in.

 

[Rolo]

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Faulk28 wrote:

Are you sure about that yearly cap for contributions? The military TSP sign up form just says what percentrage of your bonuses do you wanted deposited. Is this in writing anywhere?I wonder if they police this or is this one of those deals where they would deposit the 30k in TSP but force you to pay tax.

Correction: the limit this year is $13K, and $14K for next year. This is IRS--not TSP--mandated.

From TSP.gov fact sheets:

Annual Limit on Elective Deferrals (1/2004) - 7 pages

What is the annual limit on elective
deferrals?
Section 402 of the Tax Code limits the amount of
income that you may elect to defer under all cash
or deferred arrangements during a tax year. (For
most employees a tax year is January 1 through
December 31.) The elective deferral limit for 2004
is $13,000. The limit will increase each year by
$1,000, until it reaches $15,000 in 2006.

What are elective deferrals?
Elective deferrals are tax-deferred amounts that
you choose to contribute to a plan instead of receiving
those amounts as pay. Because such contributions
are tax-deferred, they are not included
in your taxable gross income for the year in which
they are contributed. Your employer makes the
contributions on your behalf under a qualified
cash or deferred arrangement (as defined in section
401(k) of the Internal Revenue Code (Tax Code)).
For TSP participants, Employee Contributions are
considered to be elective deferrals. Elective deferrals
do not include Agency Automatic (1%) or
Agency Matching Contributions because these
contributions are not considered part of your pay.



What happens to my Employee Contributions
when the annual limit is reached?
When the annual limit is reached, your Employee
Contributions must be suspended for the remainder
of the year. The TSP system will not allow any
Employee Contribution to be processed that will
cause the total amount of Employee Contributions
for the year to exceed the annual limit. Your
agency payroll office must ensure that your Employee
Contributions automatically resume the first
pay date in the following year.
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