moving TSP funds at 59 & 1/2.... any advice?

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federal dinosaur
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moving TSP funds at 59 & 1/2.... any advice?

Post by federal dinosaur » Wed Sep 16, 2015 4:15 pm

I am a FERS federal employee. I soon will be able to transfer a portion of my regular TSP account to an IRA because I will have reached the ripe old age of 59 & 1/2. Do we have any Bogleheads out there willing to share their experience in how they accomplished this action? Were there any pitfalls in the process that one should watch out for or avoid?

retiredjg
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by retiredjg » Wed Sep 16, 2015 4:47 pm

federal dinosaur wrote:I am a FERS federal employee. I soon will be able to transfer a portion of my regular TSP account to an IRA because I will have reached the ripe old age of 59 & 1/2. Do we have any Bogleheads out there willing to share their experience in how they accomplished this action? Were there any pitfalls in the process that one should watch out for or avoid?
I can't think of any reason that you would want to move your money out of the TSP.

After I retired I moved part of mine to Vanguard just using the standard TSP form for a lump sum withdrawal. I don't recall any issues.

sawhorse
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by sawhorse » Wed Sep 16, 2015 9:52 pm

What are your reasons for wanting to move out of the TSP? Would you move all of the money or only some?

iflyjetzzz
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by iflyjetzzz » Wed Sep 16, 2015 10:45 pm

My wife and I are retired military. We moved both of our TSP accounts into Scottrade IRAs. Our TSPs were comprised of both pretax and posttax dollars. Scottrade moved pretax money into a traditional IRA and posttax into a Roth IRA.
Zero problems with the transfer.

Over the course of several years (I monitored tax brackets to minimize tax liability), we converted all of our traditional IRA dollars to our Roth accounts.

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Jerry55
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by Jerry55 » Wed Sep 16, 2015 10:50 pm

The ONLY thing I would mention is to keep part of your funds in the TSP.

That way, if things go south or you just want guaranteed returns (G fund which adjusts rates monthly)

or the L Income fund, you can run for cover instead of using other Vanguard options.

I personally have 2 Vanguard funds (1 Roth, 1 Taxable) and a Dodge & Cox International. I just turned 60, and

retired CSRS in 2012. I'm currently 50/25/25 C/S/I in the TSP. In about 5-8 years, I'll move everything to G

and take RMD's from there. Just keep access to the TSP as an option, coz things change.
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

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federal dinosaur
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by federal dinosaur » Thu Sep 17, 2015 6:29 pm

Thanks to all who replied. I will probably just leave things alone until I retire at age 62. At that time, I will likely move a portion of my TSP account over to VG. The portion left in the TSP will probably be my "boring" investments that involve low risk. I hope to take a bit more risk with the VG IRA.

Jerry55.... I work for the same agency as you did & in the same career field (oddly enough, even with some of the same people). Thanks for the feedback. But I am in FERS, which means I'll be working a bit longer than you did.

iflyjetzzz... thank you and your wife for your military service. Good to know that your TSP transfer went well. I believe I will also convert my traditional IRA over to my Roth IRA account.

sawhorse... I was just getting feedback on the option of moving the TSP funds.

retiredjg... I will now likely wait until the ripe old age of 62 to move part of my TSP account over to VG.

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Jerry55
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by Jerry55 » Thu Sep 17, 2015 6:36 pm

federal dinosaur wrote: Jerry55.... I work for the same agency as you did & in the same career field (oddly enough, even with some of the same people). Thanks for the feedback. But I am in FERS, which means I'll be working a bit longer than you did.
Interesting indeed. Do you ride a motorcycle ??? small World indeed !!!
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!

hq38sq43
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by hq38sq43 » Thu Sep 17, 2015 6:51 pm

Such decisions are, of course, personal and situational. I decided to do just the opposite. Moved all my tax qualified USAA and Fidelity money into my TSP Life Cycle 2020 account. Considered moving to Vanguard, but opted for TSP because of its G Fund, low expense ratio, and exclusive focus on federal employees and retirees. I saw no need for diversification beyond what TSP offers. Still don't.

Best wishes,
Harry at Bradenton

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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by rkhusky » Fri Sep 18, 2015 6:56 am

A couple reasons to move money out of the TSP: you can't do Roth conversions and if you have Roth TSP funds you will have to take RMD's from them at 70.5.

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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by retiredjg » Fri Sep 18, 2015 8:33 am

federal dinosaur wrote:retiredjg... I will now likely wait until the ripe old age of 62 to move part of my TSP account over to VG.
This sounds like a good plan to me. I also moved part - so I'd have an IRA to withdraw from without getting into the final full withdrawal thing with the TSP.

My TSP is where I hold most of my bonds - both G fund and F fund. It is very boring which is fine because I have not had to mess with it in years. I periodically look up the balance - that is all.

I said it is boring, but it always makes money. Slow and steady. :happy

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federal dinosaur
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by federal dinosaur » Fri Sep 18, 2015 4:15 pm

rkhusky,
You are so right! Although I have not contributed to a Roth TSP, why shouldn't I have the option to convert my regular TSP to a Roth and remain in the TSP? Very frustrating.

retiredjg
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by retiredjg » Fri Sep 18, 2015 4:52 pm

It may be frustrating, but if you are married it is probably better not to do an in plan Roth Rollover in the TSP. I say that because if you are married, there is a possibility you will drop into a lower tax bracket when you retire. That would be the time to do Roth conversions - up to the top of the lower bracket. If you are single, this is not as likely and converting now vs converting later might be a wash.

Alan S.
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by Alan S. » Fri Sep 18, 2015 5:37 pm

This article seems to imply that the TSP is all about asset accumulation, and they have been losing assets to IRA rollovers because of their many unattractive withdrawal restrictions. However, improvements do not come quickly even after the issues have been identified:

http://www.govexec.com/pay-benefits/201 ... ns/118622/

pr3sg1ad
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by pr3sg1ad » Fri Sep 18, 2015 5:44 pm

rkhusky wrote:A couple reasons to move money out of the TSP: you can't do Roth conversions and if you have Roth TSP funds you will have to take RMD's from them at 70.5.

What is bad about having to take RMDs at 70.5 years old? What would one be waiting for to being receiving and spending money they have saved? I'm just curious about the thought behind the statement.

Thanks

plg

rkhusky
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by rkhusky » Fri Sep 18, 2015 6:36 pm

pr3sg1ad wrote:
rkhusky wrote:A couple reasons to move money out of the TSP: you can't do Roth conversions and if you have Roth TSP funds you will have to take RMD's from them at 70.5.

What is bad about having to take RMDs at 70.5 years old? What would one be waiting for to being receiving and spending money they have saved? I'm just curious about the thought behind the statement.

Thanks

plg
Because you don't have to take RMD's from a Roth IRA, but you do from a Roth 401K (or Roth TSP). Many people prefer to take RMD's from their Traditional account first and let the Roth grow tax free as long as possible.

If you need the Roth to live on, then it probably doesn't matter to you.

pr3sg1ad
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Re: moving TSP funds at 59 & 1/2.... any advice?

Post by pr3sg1ad » Fri Sep 18, 2015 6:42 pm

rkhusky wrote:
pr3sg1ad wrote:
rkhusky wrote:A couple reasons to move money out of the TSP: you can't do Roth conversions and if you have Roth TSP funds you will have to take RMD's from them at 70.5.

What is bad about having to take RMDs at 70.5 years old? What would one be waiting for to being receiving and spending money they have saved? I'm just curious about the thought behind the statement.

Thanks

plg
Because you don't have to take RMD's from a Roth IRA, but you do from a Roth 401K (or Roth TSP). Many people prefer to take RMD's from their Traditional account first and let the Roth grow tax free as long as possible.

If you need the Roth to live on, then it probably doesn't matter to you.

Thanks rkhusky

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