Thrift Savings Plan rollover to IRA?

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Thrift Savings Plan rollover to IRA?

Postby MnD » Thu May 09, 2013 12:29 pm

I'm just starting to work on a distribution phase plan for retirement 5 years out at age 56 married couple same age.
With an expense ratio of .027% and access to the arguably the "perfect" bond fund in the G fund, are their any common situations where one would want to roll funds out of the TSP into an IRA?
We have enough funds outside my TSP in taxable, 401-K with brokerage option and IRA's to cover emerging markets, small cap value tilt, small cap international etc in appropriate percentages.

We have nothing unusual about our situation with the possible exception of a plan to "upsize" our personal residence cost at retirement which will require a lump sum outlay.
Middle of the 28% bracket now and expect to be in the middle of the 25% bracket in retirement.
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Re: Thrift Savings Plan rollover to IRA?

Postby VictoriaF » Thu May 09, 2013 12:38 pm

MnD wrote:are there any common situations where one would want to roll funds out of the TSP into an IRA?

1. If you want to convert traditional retirement accounts into Roth accounts, you cannot do it within TSP. (I hope this would change.)
2. TSP's options for taking distributions are too rigid.

Victoria
Last edited by VictoriaF on Thu May 09, 2013 12:39 pm, edited 1 time in total.
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Re: Thrift Savings Plan rollover to IRA?

Postby jnsickler » Thu May 09, 2013 10:33 pm

Hi, I'm recently retired who's faced a lot of similar thought processes. I too think very highly of the G Fund to fill a ST fixed income allocation. As for the rest, I decided to make a partial transfer so I could get into some of the Dimensional Funds. While it's true that I'm now facing higher expense ratios (especially considering I had to hire an advisor to get DFA funds) I believe I'll come out ahead long term through better coverage in the asset classes. Time will tell.

Also, as I read it, by taking the partial transfer I'm leaving the door open to reverse course and move back into the TSP at a later date. I may be wrong about that though.
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Re: Thrift Savings Plan rollover to IRA?

Postby retiredjg » Fri May 10, 2013 10:06 am

If you have space outside the TSP to hold the things not available in the TSP, I don't see any reason to move. There's nothing to gain in my opinion. Here's how I did it:

    TSP
    F Fund
    G Fund

    Vanguard IRAs
    Total Stock Market
    Total International (contains everything)
    Small cap value
    REIT
    Bonds
This has everything I want at very low cost. I take my expenses out of the Vanguard IRA(s) (rebalancing at the same time) and just leave the TSP completely alone.
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Re: Thrift Savings Plan rollover to IRA?

Postby MnD » Sat May 11, 2013 9:00 am

Thanks all for the replies. I'm just getting started on a distribution plan but I'm relieved that keeping it in place is at least an option with some caveats.
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Re: Thrift Savings Plan rollover to IRA?

Postby retiredjg » Sat May 11, 2013 9:17 am

You do have to be mindful with the TSP because it has limited withdrawal options. You only get to make one partial withdrawal (could be in-service or after separation). After that, you can't take other partial withdrawals, only a full withdrawal. Full withdrawal includes setting up a monthly payment (which can be adjusted each year) that lasts until the money is gone or you just take it all in one distribution.

Unlike an IRA, you can't just decide "I'll take $1000 today and maybe next month I'll take $4000 and next year I won't take any". This is one way they keep expenses so low.

This lack of flexibility is why I made my TSP a big bucket of sitting bonds and do all my transactions in my IRAs. At some point, I'll have to make a change, but that won't need to happen until RMD time.
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