Why continue with TSP vs IRA rollover?

[jurate1]

Hello all, I have been retired for 4 years now age 66 with a healthy TSP account. I plan not to make withdrawals until I reach at least 70. However, I am getting increasingly frustrated with TSP transfer rules/2 per month. I guess I did not understand that transfers to the G fund counted as one of the 2 transfers. We moved to safety 2 weeks ago. Now I cannot transfer back into the market until April 1. Overall we have been fairly satisfied with the TSP however I am wondering if an IRA rollover woutd provide more flexibility.

Why do individuals stay with the TSP vs roll over to an IRA? With an IRA I can make transfers anytime I want and make withdrawals anytime I want etc... I do like that the G Fund is more secure then a traditional cash IRA investment. I like the simplicity of the TSP vs evalutating hundreds of S and P 500 funds to see which is best... Any other pro's/cons to consider? Thanks Gina

 

[JTH]

Hello all, I have been retired for 4 years now age 66 with a healthy TSP account. I plan not to make withdrawals until I reach at least 70. However, I am getting increasingly frustrated with TSP transfer rules/2 per month. I guess I did not understand that transfers to the G fund counted as one of the 2 transfers. We moved to safety 2 weeks ago. Now I cannot transfer back into the market until April 1. Overall we have been fairly satisfied with the TSP however I am wondering if an IRA rollover woutd provide more flexibility.

Why do individuals stay with the TSP vs roll over to an IRA? With an IRA I can make transfers anytime I want and make withdrawals anytime I want etc... I do like that the G Fund is more secure then a traditional cash IRA investment. I like the simplicity of the TSP vs evalutating hundreds of S and P 500 funds to see which is best... Any other pro's/cons to consider? Thanks Gina

Greetings

I started TSP around 2001 when it first became available to the military. At the time, we had unlimited IFT's and there wasn't much competition. Now days our internet investing choices have exploded, and (if anything) it's made TSP more antiquated, compounded by the fact their services/website are worse than they've ever been.

For myself, I transferred out and have no regrets.

 

[Bullitt]

If you're over the age of 59.5 there is zero reason to leave money in TSP, even for the G fund.

 

[FAAM]

Ditto this & JTH's reply to jurate1. I was in TSP for my 30-yr FERS career (+ bought back 9+ years military time), retired 2+ years ago with sizable TSP balance of which about 15-to-20% was ROTH. I've Transfered all but about 13% of my TSP to IRAs, and plan to transfer the rest in the next year or two. Why -- just as JTH replied. Also, I think it good idea to Convert your non-ROTH to Roth (unless you really think your future tax rates when you might withdraw those funds will be very significantly less than your tax rates upon phased-conversion will be)... and you cannot convert to ROTH within TSP. I stongly forcast that in 10-to-25/30 years when I'll perhaps withdraw such retirement funds, that my tax rates will be approximately what they are now and likely somewhat more. So I move my TSP to IRA, convert all or most of it to ROTH-IRA over a phased 3-to-6 years & absorb paying the taxes (at no more than 24% rate) in this timeframe to have zero-taxes on all subsequent gains and on any future withdrawals, nor I don't think it'll be taxed if passed on after I go -- and ROTH IRA funds won't be subject to any RMDs (Required Min. Distributions). You have to do your own assessments but hope this helps and good luck.

 

[Skooby]

If you're over the age of 59.5 there is zero reason to leave money in TSP, even for the G fund.

You'd put it in a IRA or Roth IRA?

Would it make a difference if you have a Roth TSP?

I'm 47...

 

[hotwings]

You'd put it in a IRA or Roth IRA?

Would it make a difference if you have a Roth TSP?

I'm 47...

I’m retired with a good traditional tsp bal, pension etc. I couldn’t take advantage of Roth when I was working because of our income limits. Where possible, I recommend the Roth conversion with your non-tsp accounts before you hit the RMD age, currently 72 years old. Why, because when you turn 65 and signup for Medicare Part B, it looks at the AGI ( line 11) on your fed tax form from two years back and determines if you have to pay an IRRMA surcharge. That might bite you in the arse when you start taking RMDs from your traditional IRAs and 401ks. The AGI is not impacted by Roth IRAs or TSP Roth because you don’t have to take a RMD for a Roth.

So, why do I keep my money in TSP? It all has to do with coverage if the financial system goes belly up. All of your money in the G fund would be insured by Uncle Sam. Only $250k and sometimes $500k is insured if in a brokerage or bank account. So in the interim, I’m staying in TSP until something changes with regards to coverage in the event of a financial failure. Hey, the US is $37T in debt and someone will have to pay for it down the road because it’s unsustainable. I’m probably a bit conservative but I worked hard for my retirement savings.
Regards

 

[Bullitt]

You'd put it in a IRA or Roth IRA?

IRA. I'll be withdrawing from TSP starting at age 50 without penalty as a special category employee.

Roth TSP is always 59.5, no exceptions. An outside IRA would not allow for withdraws either before that age.

I do have a Roth IRA outside of TSP so the option for a partial rollover down the line is always there, but that's more a tax planning issue than spending issue.

 

[nasa1974]

The RMD age has been changed.
If you were born between 1951 and 1959 the new RMD age is now 73.
If you were born between 1960 or later the new RMD age is 75.
Also changes to a 401K Roth account.

 

[jurate1]

Thanks everyone for your feedback. I will need to evaluate our situation.. One option perhaps is to transfer some but not all. I really appreciate everyones comments...

 

[evilanne]

Hello all, I have been retired for 4 years now age 66 with a healthy TSP account. I plan not to make withdrawals until I reach at least 70.

Why wait until 70? I like FAAM's post about conversions & hotwing's post regarding Medicare/IRRMA & the financial system. I'd recommend taking out at least the difference between your current income and the top of the IRRMA or tax bracket you are currently in based on your filing status.
see SSA - POMS: HI 01101.020 - IRMAA Sliding Scale Tables - 01/04/2024 and IRMAA Brackets from 2007 to 2022 - IRMAA Solutions
Whether you spend it, convert or invest it in a regular brokerage account (LT Capital Gains are taxed at lower rates) or some combination it really doesn't make sense not to withdraw anything if you have a sizable balance, once you do reach RMD age you lose control of how much you have to withdraw each year and are likely to end up in a higher tax bracket. Tax rates are at their lowest right now through 2025.

Note: MAGI (for IRRMA) = AGI + TaxExempt Interest

Note: There is a 30 day waiting period when you make a TSP withdrawal, before you can make another one.

Note: There are 5 years rules related to Roth so I would recommend converting at least a small amount to open a Roth if you do not already have one.