[Should I move money from my TSP account to a traditional IRA?]

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renegade06
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Joined: Sat Jan 12, 2019 3:00 pm

[Should I move money from my TSP account to a traditional IRA?]

Post by renegade06 » Tue Jan 14, 2020 11:28 am

[Moved into a separate thread from: When to set up a backdoor Roth? --admin LadyGeek]

I currently have a back door Roth as well as a TSP (former Gov employee) and the 401k from my current employer. Is there an advantage to moving my money out of a TSP and opening a traditional IRA so that I can have more options (like a REIT fund) in non-taxable? If I do this, I won't be able to open a backdoor Roth in future years. Would it be better to leave things as-is and just buy a REIT fund in taxable?

bloom2708
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Re: [Should I move money from my TSP account to a traditional IRA?]

Post by bloom2708 » Tue Jan 14, 2020 5:12 pm

How about moving your old TSP into your current 401k? Do you have good/low cost index funds in your 401k?

I would not give up back door capabilities for your Roth. Note: you have a Roth IRA and there are different ways to get money into the Roth. Regular, Back Door, Conversion.

If you want REIT, put it in your Roth IRA. Bonds in 401k/TSP. Roth stock index funds. Taxable depends on your space and uses. REIT isn't good in taxable. Ordinary income and cap gains distributions. Tax hit.
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retiredjg
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Re: [Should I move money from my TSP account to a traditional IRA?]

Post by retiredjg » Tue Jan 14, 2020 5:18 pm

You should not buy REIT in taxable. It's one of the worst choices possible for tax-efficiency.

Put the REIT in Roth IRA or just be happy with the amount of REIT that is in your other US stock index funds.

Topic Author
renegade06
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Joined: Sat Jan 12, 2019 3:00 pm

Re: [Should I move money from my TSP account to a traditional IRA?]

Post by renegade06 » Tue Jan 14, 2020 6:50 pm

Thanks for your thoughts. I current have my Roth IRA in VGT (Vanguard Technology) and it’s about $18k. I never thought about putting the REIT in the Roth but I will look at that. That’s a great suggestion!

On the TSP and current 401k, I have some decent options in my current 401k, but not great. I’m holding my bonds (approx 11% of my portfolio) in the TSP G fund and some Vanguard Total Bond fund inside my current 401k.

MnD
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Re: [Should I move money from my TSP account to a traditional IRA?]

Post by MnD » Tue Jan 14, 2020 7:19 pm

With regards to any equity (stock) positions in your TSP, index funds now available in IRA's are as good or slightly better in terms of costs and level of diversification.So it really doesn't matter and is more a decision of personal preference and what works for convenience.

The TSP G fund however is a unique opportunity to hold a fixed income position with intermediate term treasury yields and no interest risk due to zero duration. Holding total bond market fund elsewhere when you have access to the G fund is holding uncompensated risk. This is because most of total bond fund consists of treasury and government agency bonds with interest risk but yield no more than the G fund. If someone just must have more yield than the G fund, one might consider pairing G fund holdings with a 100% corporate bond fund in an IRA. This would compare favorably in risk adjusted return to holding the G fund and a total bond fund.
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