TSP to Roth IRA Tax Strategy (Post Retirement)

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geobrick
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TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Mon Sep 17, 2018 4:57 pm

Has anyone developed a calculator that could help with planning the best windows opportunity to transfer TSP funds into a Roth IRA? It could help show what transfer amounts would push us into a higher tax bracket and could show the break-even point for when the tax free growth of the transferred amount begins to outperform what would have been left in the TSP. It seems it would depend on our individual post retirement incomes and tax brackets but should be a good enough to use as guideline.

There are many threads where the topic of getting (non-Roth) TSP assets into a Roth IRA after retirement is discussed. The key factor (to me) is coming up with a rollover strategy that minimizes the tax burden associated with the conversion. Several people have discussed a process where they first rollover all or some portion of their TSP assets into a traditional IRA (with no tax effect) and then come up with the yearly amount that would be transferred to the Roth IRA in a way to minimize their tax burden. That makes sense but it can be very complicated to figure out the timing for doing this.

For my specific situation, I retired under FERS meeting the MRA+30 requirement so I can start withdrawals from the TSP without any penalties. I have the FERS Annuity (with the Social Security Supplement) as income plus I have other earnings from qualified dividends and capital gains that are taxed at a lower rate than income. The challenge is to find the best tax advantaged opportunity to start transferring from the TSP to a Roth IRA (using a traditional IRA as the first stop). An online calculator or excel spreadsheet would really help. It may turn out that rolling the TSP into a Roth has no advantage for my situations.

mouth
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by mouth » Mon Sep 17, 2018 5:07 pm

From a pure "traditional" to "Roth" point of view the math is the same and I'd say i-ORP is your best bet.

For the specifics about dealing with the TSP, you'll probably want to figure in any impact the TSP withdrawal changes might have on your plan.

rkhusky
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by rkhusky » Mon Sep 17, 2018 5:18 pm

Look here for some spreadsheets & calculators: https://www.bogleheads.org/wiki/Tools_and_calculators. For example, the Personal finance toolbox or Retiree Portfolio Model.

For a quick check, look at your expected marginal rates in retirement before and after taking SS and before and after RMD's hit. If your marginal rate now is less than in most of those time periods, now is probably a good time to do Roth conversions.

Note that the way SS is taxed can create unexpected marginal rates.

Note also that it is not easy to do multiple TSP withdrawals at the current time.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Tue Sep 18, 2018 2:49 am

Thanks. I'll check out the i-ORP and the other link provided. I've read there are changes coming to the TSP withdrawal options I just don't know when they'll be implemented.

I'm thinking a good time to start the transfer in my case is when the FERS Supplement (the SS supplement) payments stop at age 62. At that point my income will drop and it could be a good time from a tax perspective to start the rollover. In my situation I could offset the lost income by selling off some investment in a non-retirement account (which would be taxed at the capital gains rate).

I'm also wondering whether we should focus on effective tax rates vs the marginal tax rates. For example, if with deductions, the federal effective tax is only 10% and transferring $20,000 in a year results in the overall effective rate moving up to 12.5% should we consider that effective rate attractive enough to start the transfer or should we look strictly at the marginal rate which may be 22 or 24% because that's what will be used to calculate the tax on the $20,000 conversion regardless of the effective rate?

Is the only viable marginal rate for making this type of transfer 12%? I'm not sure I can stay below that income level until after the FERS Supplement stops at age 62. At that point I'll need to supplement the OPM income with qualified dividend and capital gains. I'm pretty sure those earnings are not used for determining the marginal tax brackets. I'll have to play with the calculators to see what I find.

rkhusky
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by rkhusky » Tue Sep 18, 2018 3:07 am

You should look at marginal rates first and map out the different marginal rates you may experience with different amounts of Roth conversions. SS taxation causes a hump in the marginal rates (see https://www.bogleheads.org/wiki/Taxatio ... y_benefits) and effective rates are useful to calculate when SS is involved.

Dividends and cap gains do impact your marginal rates because other income can push these into a higher tax bracket, creating an even higher marginal tax rate (e.g. $1 extra income is taxed at 12%, but pushes $1 in QD from 0% bracket to 15% bracket -> marginal rate is 27%).

Tdubs
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by Tdubs » Tue Sep 18, 2018 4:35 am

I-ORP is a great resource. Made for exactly this question. But be sure to select the "extended" tab and use the more detailed worksheet.

And put in a more modest return than its default. You will also need to find the little pull down window that will allow for "unlimited conversions" if you want to do that.

MichDad
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by MichDad » Tue Sep 18, 2018 4:58 am

The Federal Retirement Thrift Investment Board announced a few months ago that it expected to implement the liberalized withdrawal rules in September 2019, about one year from now.

I’m trying to wait until then before I begin making Roth conversions from my TSP account. In the meantime, we’re making Roth conversions from my wife’s 401(k) accounts.

I’m 63 years old and am planning to wait until age 70 before starting to collect my Social Security benefits.

MichDad

rkhusky
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by rkhusky » Tue Sep 18, 2018 5:35 am

MichDad wrote:
Tue Sep 18, 2018 4:58 am
The Federal Retirement Thrift Investment Board announced a few months ago that it expected to implement the liberalized withdrawal rules in September 2019, about one year from now.

I’m trying to wait until then before I begin making Roth conversions from my TSP account. In the meantime, we’re making Roth conversions from my wife’s 401(k) accounts.

I’m 63 years old and am planning to wait until age 70 before starting to collect my Social Security benefits.

MichDad
It will be interesting to see if TSP maintains the current withdrawal forms that require notarized signatures of both spouses and signed account verification from the IRA provider for each withdrawal.

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FiveK
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by FiveK » Tue Sep 18, 2018 11:31 am

geobrick wrote:
Tue Sep 18, 2018 2:49 am
I'm also wondering whether we should focus on effective tax rates vs the marginal tax rates. For example, if with deductions, the federal effective tax is only 10% and transferring $20,000 in a year results in the overall effective rate moving up to 12.5% should we consider that effective rate attractive enough to start the transfer or should we look strictly at the marginal rate which may be 22 or 24% because that's what will be used to calculate the tax on the $20,000 conversion regardless of the effective rate?
Use marginal.

See The reason to use marginal tax rates... and Marginal Vs Effective Tax Rates And When To Use Each for more.
Is the only viable marginal rate for making this type of transfer 12%? I'm not sure I can stay below that income level until after the FERS Supplement stops at age 62. At that point I'll need to supplement the OPM income with qualified dividend and capital gains. I'm pretty sure those earnings are not used for determining the marginal tax brackets. I'll have to play with the calculators to see what I find.
Doing trad->Roth conversions now is favorable if your current marginal rate is lower than the marginal rate you expect later (when taking SS, etc.). It's even favorable with equal marginal rates if you pay the conversion tax from cash on hand, because in effect you then move taxable funds into Roth. See Maxing out your retirement accounts for more.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Tue Sep 18, 2018 11:39 am

Tdubs wrote:
Tue Sep 18, 2018 4:35 am
I-ORP is a great resource. Made for exactly this question. But be sure to select the "extended" tab and use the more detailed worksheet.

And put in a more modest return than its default. You will also need to find the little pull down window that will allow for "unlimited conversions" if you want to do that.
Thanks. I'll look for those details and play with it.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Tue Sep 18, 2018 12:24 pm

MichDad wrote:
Tue Sep 18, 2018 4:58 am
The Federal Retirement Thrift Investment Board announced a few months ago that it expected to implement the liberalized withdrawal rules in September 2019, about one year from now.

I’m trying to wait until then before I begin making Roth conversions from my TSP account. In the meantime, we’re making Roth conversions from my wife’s 401(k) accounts.

I’m 63 years old and am planning to wait until age 70 before starting to collect my Social Security benefits.

MichDad
Thanks, I've read a bunch of your posts on this subject (and rkhusky's too). I'll run the numbers but I think I'll end up waiting for the FERS supplement payments to end at age 62. At that point I can delay SS until age 70 then have about 8 years to spread the transfer withdrawals.

One twist in delaying SS is that I'd likely be supplementing income during that time with sales of various stock investments (individual stocks, ETFs Vanguard S&P funds). Those Investments should have a higher long term gain potential (if left alone) than the guaranteed gain I'd get by delaying SS. We're all playing the odds game of how long we'll really be collecting SS (I'd like to imagine it will be forever but no one knows). In that case, it may be better to take the SS as soon as possible. So many moving pieces which is why I started to wonder if someone developed a tool. I'll run the numbers through the recommended tools and see what I come up with. The biggest advantage to the Roth transfer I see is that even if there's no advantages shown by running the numbers now, Tax rates can change (and almost never in our favor - I live in CA and the 2018 tax law will increase my effective tax rate by 70% even while the marginal rate drops - it's all because of the $10k cap on state and property tax deductions). Having money in a roth IRA 'should' keep it protected from future tax changes.

We can't currently convert my wife's IRA but we have relatively small amounts in inherited IRAs we can transfer to a Roth if that's allowed.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Tue Sep 18, 2018 12:29 pm

FiveK wrote:
Tue Sep 18, 2018 11:31 am
geobrick wrote:
Tue Sep 18, 2018 2:49 am
I'm also wondering whether we should focus on effective tax rates vs the marginal tax rates. For example, if with deductions, the federal effective tax is only 10% and transferring $20,000 in a year results in the overall effective rate moving up to 12.5% should we consider that effective rate attractive enough to start the transfer or should we look strictly at the marginal rate which may be 22 or 24% because that's what will be used to calculate the tax on the $20,000 conversion regardless of the effective rate?
Use marginal.

See The reason to use marginal tax rates... and Marginal Vs Effective Tax Rates And When To Use Each for more.
Is the only viable marginal rate for making this type of transfer 12%? I'm not sure I can stay below that income level until after the FERS Supplement stops at age 62. At that point I'll need to supplement the OPM income with qualified dividend and capital gains. I'm pretty sure those earnings are not used for determining the marginal tax brackets. I'll have to play with the calculators to see what I find.
Doing trad->Roth conversions now is favorable if your current marginal rate is lower than the marginal rate you expect later (when taking SS, etc.). It's even favorable with equal marginal rates if you pay the conversion tax from cash on hand, because in effect you then move taxable funds into Roth. See Maxing out your retirement accounts for more.
Thanks, That makes sense.

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Watty
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by Watty » Tue Sep 18, 2018 12:31 pm

One thing to keep in mind is that the TSP has less favorable inheritance rules than an IRA. In some special situations your heirs might be required to withdraw all the money from the TSP instead of converting it to an inherited IRA.

https://www.bogleheads.org/wiki/TSP_estate_planning

There have been posts by people that ran into this and had to pay a lot of taxes on the TSP money when they inherited it.

Unless you have a good reason not to, you might want to roll all the money into an IRA because of this.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Fri Sep 21, 2018 2:12 pm

mouth wrote:
Mon Sep 17, 2018 5:07 pm
From a pure "traditional" to "Roth" point of view the math is the same and I'd say i-ORP is your best bet.
I just ran some initial numbers in I-ORP and assuming I entered the numbers properly, it seems to be in the ballpark of my own rough calculations on disposable income however I'm surprised at what it is suggesting for the Roth IRA transfer. It's seems to be suggesting I move about 13% of the current total per year through age 61. According to the results, I'd have a tax liability reaching 6 digits for those years (assuming I'm reading it correctly). Is this consistent with what other's are seeing? I know it all depends on what's in our TSPs and other income. I suppose the FERs annuity with the SS FERS supplement plus any amount transferred from the TSP to a Roth is all taxed at the marginal tax rate.

Can the i-ORP show a comparison between following their recomended transfers vs not doing it? I'd like to see a big improvement before risking such a big move. I need to start looking at I-ORP threads.
Last edited by geobrick on Fri Sep 21, 2018 4:56 pm, edited 1 time in total.

trueblueky
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by trueblueky » Fri Sep 21, 2018 3:36 pm

geobrick wrote:
Tue Sep 18, 2018 12:24 pm
MichDad wrote:
Tue Sep 18, 2018 4:58 am
The Federal Retirement Thrift Investment Board announced a few months ago that it expected to implement the liberalized withdrawal rules in September 2019, about one year from now.

I’m trying to wait until then before I begin making Roth conversions from my TSP account. In the meantime, we’re making Roth conversions from my wife’s 401(k) accounts.

I’m 63 years old and am planning to wait until age 70 before starting to collect my Social Security benefits.

MichDad
Thanks, I've read a bunch of your posts on this subject (and rkhusky's too). I'll run the numbers but I think I'll end up waiting for the FERS supplement payments to end at age 62. At that point I can delay SS until age 70 then have about 8 years to spread the transfer withdrawals.

One twist in delaying SS is that I'd likely be supplementing income during that time with sales of various stock investments (individual stocks, ETFs Vanguard S&P funds). Those Investments should have a higher long term gain potential (if left alone) than the guaranteed gain I'd get by delaying SS. We're all playing the odds game of how long we'll really be collecting SS (I'd like to imagine it will be forever but no one knows). In that case, it may be better to take the SS as soon as possible. So many moving pieces which is why I started to wonder if someone developed a tool. I'll run the numbers through the recommended tools and see what I come up with. The biggest advantage to the Roth transfer I see is that even if there's no advantages shown by running the numbers now, Tax rates can change (and almost never in our favor - I live in CA and the 2018 tax law will increase my effective tax rate by 70% even while the marginal rate drops - it's all because of the $10k cap on state and property tax deductions). Having money in a roth IRA 'should' keep it protected from future tax changes.

We can't currently convert my wife's IRA but we have relatively small amounts in inherited IRAs we can transfer to a Roth if that's allowed.
Not allowed.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Fri Sep 21, 2018 4:56 pm

trueblueky wrote:
Fri Sep 21, 2018 3:36 pm
Not allowed.
Makes sense. I see why that would be restricted. When someone inherits a Roth IRA and the estate is under the estate tax threashold his it passed on compleatly tax free to the beneficiaries?

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FiveK
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by FiveK » Fri Sep 21, 2018 5:24 pm

geobrick wrote:
Fri Sep 21, 2018 2:12 pm
Can the i-ORP show a comparison between following their recomended transfers vs not doing it? I'd like to see a big improvement before risking such a big move. I need to start looking at I-ORP threads.
Yes. Use the "Essential ORP" version and it won't do any Roth conversions.

In the extended ORP you can limit Roth conversions to a certain tax bracket.

ORP does not have a rigorous tax calculator. In your situation it probably misses at least the NIIT and the IRMAA tiers. Whether that makes a significant difference...? You might compare the tax ORP calculates with a good 2018 tax estimator and evaluate how much it differs.

trueblueky
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by trueblueky » Fri Sep 21, 2018 7:17 pm

geobrick wrote:
Fri Sep 21, 2018 4:56 pm
trueblueky wrote:
Fri Sep 21, 2018 3:36 pm
Not allowed.
Makes sense. I see why that would be restricted. When someone inherits a Roth IRA and the estate is under the estate tax threashold his it passed on compleatly tax free to the beneficiaries?
When you inherit a traditional IRA, you must take a required minimum.distribution each year. It is taxable. (If you inherit as spouse, you have other options.)

When you inherit a Roth IRA, you must take RMD each year. It is tax-free.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 1:49 am

I know I can start withdrawing funds from my TSP now (at age 58) without a penalty but If I transfer to a Roth IRA in 2 steps by first transferring to a traditional IRA, do I need to be worried about penalties when I transfer funds from the traditional to the Roth because I'm below 59.5 or is it not considered a withdrawal?

ExitStageLeft
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by ExitStageLeft » Sat Sep 22, 2018 11:29 am

geobrick wrote:
Sat Sep 22, 2018 1:49 am
I know I can start withdrawing funds from my TSP now (at age 58) without a penalty but If I transfer to a Roth IRA in 2 steps by first transferring to a traditional IRA, do I need to be worried about penalties when I transfer funds from the traditional to the Roth because I'm below 59.5 or is it not considered a withdrawal?
Rolling a portion of your TSP tax-deferred balance into a traditional IRA will incur no taxes nor any penalties unless you take a distribution from the tIRA before age 59.5.

Converting a portion of your tIRA to a Roth IRA will be a taxable event. The amount converted will be reported as income and you'll have to pay whatever your current marginal rate is.

The rIRA will be subject to the 5-year rule on conversions and the amount converted may be subject to a penalty if withdrawn before age 59.5

https://www.kitces.com/blog/understandi ... nversions/

If you will be needing income above and beyond the FERS annuity and FERS supplement, you'll want to make sure you have that ironed out before doing the rollover and Roth conversions. Otherwise the only consideration would be the tax consequences of the amount converted.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 12:55 pm

ExitStageLeft wrote:
Sat Sep 22, 2018 11:29 am
Rolling a portion of your TSP tax-deferred balance into a traditional IRA will incur no taxes nor any penalties unless you take a distribution from the tIRA before age 59.5.
OK. That part is clear.
ExitStageLeft wrote:
Sat Sep 22, 2018 11:29 am
Converting a portion of your tIRA to a Roth IRA will be a taxable event. The amount converted will be reported as income and you'll have to pay whatever your current marginal rate is.
This is where I need clarification. In step one, I move all or part of the funds from the TSP to a tIRA. I understand this is not a taxable event. In step 2, I want to start converting some portion of the tIRA to a rIRA (as outlined in I-ORP). I know this is a taxable event (at the marginal tax rate) but since I'm not 59.5 yet, is it subject to an early withdrawal penalty? Is this step looked at as a tIRA withdrawal followed by a rIRA contribution, is it considered a single step conversion to a rIRA?

[asked a different way]
I'm retired from Federal service at age 58 so I know I can start withdrawing from the TSP without any early withdrawal penalties but if I convert some of it to a tIRA then use those funds to convert to a rIRA, is that move now subject to an early withdrawal penalty (because I'm 58)?

If it will be subject to an early withdrawal penalty, I'll have to do a direct conversion from the TSP to a rIRA. I'll need to figure out the mechanics of that since the withdrawal options are currently limited. In either case, if I want to follow the I-ORP recommendations, I should start the conversions this year.
ExitStageLeft wrote:
Sat Sep 22, 2018 11:29 am
The rIRA will be subject to the 5-year rule on conversions and the amount converted may be subject to a penalty if withdrawn before age 59.5

https://www.kitces.com/blog/understandi ... nversions/

If you will be needing income above and beyond the FERS annuity and FERS supplement, you'll want to make sure you have that ironed out before doing the rollover and Roth conversions. Otherwise the only consideration would be the tax consequences of the amount converted.
Thanks for that information. I'll be able to leave the Roth account alone for 5 years before needing to withdraw from it (my i-ORP suggests no withdrawals until I'm 74).

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 1:33 pm

FiveK wrote:
Fri Sep 21, 2018 5:24 pm
geobrick wrote:
Fri Sep 21, 2018 2:12 pm
Can the i-ORP show a comparison between following their recomended transfers vs not doing it? I'd like to see a big improvement before risking such a big move. I need to start looking at I-ORP threads.
Yes. Use the "Essential ORP" version and it won't do any Roth conversions.

In the extended ORP you can limit Roth conversions to a certain tax bracket.

ORP does not have a rigorous tax calculator. In your situation it probably misses at least the NIIT and the IRMAA tiers. Whether that makes a significant difference...? You might compare the tax ORP calculates with a good 2018 tax estimator and evaluate how much it differs.
The essential I-ORP leaves out some detail making it hard to compare apples to apples. For example, I was able to handle the FERS Supplemental payments by putting them in earned income under the extended I-ORP and have them end at age 62. There's really no way to handle that payment in the essential I-ORP. I suppose I could remove it for an apples to apples comparison. Also, the essential version doesn't ask for the cost basis of non-retirement accounts so the taxes calculated can't be right.

Good point about NIIT. I should have no problem keeping my income below the MAGI threshold of $250,000 unless, the taxable conversion amounts count towards the MAGI threshold (does it?). Anytime there's a threshold in the tax law that's not adjusted for inflation it ends up being a tax increase that will slowly affect everyone overtime as their income eventually rises to cross the threshold. I don't think those are oversights. They're done by design.

I need to look into IRMAA. Is that something that's taxed for everyone over the threshold or is it paid as an additional Medicare cost for only those over 65 getting Medicare?
Last edited by geobrick on Sun Sep 23, 2018 2:18 am, edited 1 time in total.

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FiveK
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by FiveK » Sat Sep 22, 2018 3:08 pm

geobrick wrote:
Sat Sep 22, 2018 1:33 pm
Also, the essential version doesn't ask for the cost basis of non-retirement accounts so the taxes calculated can't be right.
Perhaps Cost Basis of the After-tax Account Initial Balance is what you seek?
Good point about NIIT. I should have no problem keeping my income below the MAGI threshold of $250,000 unless, the taxable conversion amounts count towards the MAGI threshold (does it?).
Yes, they do. Not as "investment income" but they do count as part of MAGI.
I need to look into IRMAA. Is that something that's taxed for everyone over the threshold or is it paid as an additional Medicare cost for only those over 65 getting Medicare?
It applies to income in the year you turn 62 and thereafter. The effect isn't felt until two years later, because Medicare looks back two years to make the determination. See a calculator such as the personal finance toolbox spreadsheet that handles NIIT, IRMAA, etc.

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FiveK
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by FiveK » Sat Sep 22, 2018 3:11 pm

geobrick wrote:
Sat Sep 22, 2018 12:55 pm
I know this is a taxable event (at the marginal tax rate) but since I'm not 59.5 yet, is it subject to an early withdrawal penalty?
No. Roth conversions are not subject to penalty regardless of age.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 4:31 pm

FiveK wrote:
Sat Sep 22, 2018 3:11 pm
geobrick wrote:
Sat Sep 22, 2018 12:55 pm
I know this is a taxable event (at the marginal tax rate) but since I'm not 59.5 yet, is it subject to an early withdrawal penalty?
No. Roth conversions are not subject to penalty regardless of age.
Thanks. So the 2 step process won't be an issue for someone under 59.5.

With the upcoming changes, I wonder if it would be simpler to do a direct transfer for this year. The changes should be implemented next year and I could continue doing it directly from the TSP.

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 4:39 pm

FiveK wrote:
Sat Sep 22, 2018 3:08 pm
geobrick wrote:
Sat Sep 22, 2018 1:33 pm
Also, the essential version doesn't ask for the cost basis of non-retirement accounts so the taxes calculated can't be right.
Perhaps Cost Basis of the After-tax Account Initial Balance is what you seek?
Yes but that doesn't exist in the essential I-ORP. It's only in the extended I-ORP. That affects the apples to apples comparison of doing the rIRA conversion vs not doing it.

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FiveK
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by FiveK » Sat Sep 22, 2018 6:19 pm

geobrick wrote:
Sat Sep 22, 2018 4:39 pm
FiveK wrote:
Sat Sep 22, 2018 3:08 pm
geobrick wrote:
Sat Sep 22, 2018 1:33 pm
Also, the essential version doesn't ask for the cost basis of non-retirement accounts so the taxes calculated can't be right.
Perhaps Cost Basis of the After-tax Account Initial Balance is what you seek?
Yes but that doesn't exist in the essential I-ORP. It's only in the extended I-ORP. That affects the apples to apples comparison of doing the rIRA conversion vs not doing it.
In extended I-ORP, does
Image
not prevent any t->R conversions?

geobrick
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Re: TSP to Roth IRA Tax Strategy (Post Retirement)

Post by geobrick » Sat Sep 22, 2018 6:52 pm

It should. I’ll check it out. That would help.

Update: FiveK, You are correct. You can turn off the rIRA conversions on the extended ORP. Very simple. Overall, turning off the conversion reduces my spending by $2000 a year. I think that's enough difference to justify converting to an rIRA because if I'm not spending the maximum amount, it will continue to grow even higher tax free plus it will be tax free for my beneficiaries.

I think i-ORP is a great tool for estimating retirement and providing a road map for rIRA conversions, and cash flow.

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