tsp rollover to tsp roth?

[1953greg]

i have searched and asked everyone i know for this answer.
question is: after retirement, can regular tsp funds be transferred into roth tsp while paying the taxes?
any help greatly appreciated
thanks 1953greg

 

[1953greg]

bump
please

 

[nnuut]

I really don't know 1953greg but am sure someone here does! Welcome to the Forum!
Best of luck
Norman

 

[tsptalk]

Found this...

It can make sense to convert a traditional IRA to a Roth IRA even after retirement

 

[Old_School]

i have searched and asked everyone i know for this answer.
question is: after retirement, can regular tsp funds be transferred into roth tsp while paying the taxes?
any help greatly appreciated
thanks 1953greg

I guess the question is, why would you want to? For a small TSP portfolio, perhaps it makes sense. However, by the time you retire your TSP should have gained a significant value, making you liable for all taxes of capital gains at the time you make the conversion.

When Roths first made their entrance, taxpayers were given a 4 or 5 year window for paying taxes on any IRAs they converted. I made the mistake of converting one of my IRAs that had made significant gains in the years leading up to the conversion. Naively thinking that I would continue to rack up 15-20% yearly gains, I made the conversion. After I finished paying all of the taxes, the market took a huge hit and I lost 50% of my portfolio's value, negating all of those gains. Oh well, live and learn.

 

[uscfanhawaii]

I guess the question is, why would you want to? For a small TSP portfolio, perhaps it makes sense. However, by the time you retire your TSP should have gained a significant value, making you liable for all taxes of capital gains at the time you make the conversion.

When Roths first made their entrance, taxpayers were given a 4 or 5 year window for paying taxes on any IRAs they converted. I made the mistake of converting one of my IRAs that had made significant gains in the years leading up to the conversion. Naively thinking that I would continue to rack up 15-20% yearly gains, I made the conversion. After I finished paying all of the taxes, the market took a huge hit and I lost 50% of my portfolio's value, negating all of those gains. Oh well, live and learn.

Couple of points....if I may. For what it's worth...

It is my understanding that transferring from traditional to roth tsp is not currently allowed. They (the FRTB) have been given the congressional authority to allow it, but they have not as yet made the changes to allow it.

As for your paying taxes and then the market tanks....that's always the worst fear when making the move. No matter when you do it. The law does let you 'undo' your move, as long as you do it by Oct of the year that you do your taxes (since Oct is the latest that you can postpone filing). If the market drop is outside of that window however, then it's just too late.

I am 59, but I did take advantage of the 2010 Roth IRA transfer special rules. My whole point was wanting to have 'tax diversification'. In other words, depending on how my circumstances shape up, I want to be able to take from a traditional or a Roth. If everything goes well, then I would not touch my Roth, and use it for passing on to heirs, who can then continue to push out the tax free building.

I am sure that there are many other circumstances, but this is just one perspective.