MichDad wrote:Given the current TSP rules and limitations, here's how I think I'll have to deal with my TSP account upon retirement:
First, I'll convert my entire TSP account to the G Fund. That will be temporary. I haven't held any G Fund assets since the late 1980s, when that was still required.
Right now, all my TSP assets are in the G Fund. However, I recently thought of a new strategy. When the stocks are high, e.g., the recent 18k on the Dow, I'll sell stocks in a Roth IRA and simultaneously buy stocks in the traditional TSP. This would decrease taxes on conversions, because a decline in the stock market would reduce the traditional funds.
When the stocks are low, e.g., 12k on the Dow, I'll sell stocks in the traditional TSP and simultaneously buy stocks in a Roth IRA. This would position my stocks for an untaxed growth.
I am still evaluating this strategy and don't have a good answer for the days like today. TSP and my other custodians limit frequent trading and so my strategy would work only in coarse-grained increments.
MichDad wrote:Second, I'll transfer all but the bare minimum ($200?) of my TSP account balance into low cost Vanguard IRAs. I'll be sure to separate the regular TSP assets from the Roth TSP assets into separate traditional and Roth Vanguard IRAs.
Fourth, I'll roll a portion of my traditional Vanguard IRA (that originated from the TSP) back into the TSP.
What is the advantage of removing almost all funds from the TSP and then putting some of them back in? Is it to have the flexibility of converting to Roth in Vanguard while waiting for the TSP to allow in-plan conversions, and not exceeding the TSP limits on the number of withdrawals?
I recall there is an amount, below which the TSP sends you a check. It's better to keep about $10k in order not to trigger an account closing action.
MichDad wrote:Of course, my strong preference would be for the FRTIB to change the rules to allow direct regular-to-Roth TSP conversions all within the TSP. Given the letter I recently received from the TSP, that doesn't appear to be on the horizon.
If anyone sees a different or better approach, I hope you'll share it. The lack of flexibility with the TSP is quite bothersome.
I wholeheartedly agree with you about the TSP shortcoming and likewise hope that the FRTIB would act in interest of responsible investors who want to stay in the TSP and are being driven out by its awkward rules.
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