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Transfer Roth TSP into Roth IRA?
Old 02-11-2019, 02:52 PM   #1
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Transfer Roth TSP into Roth IRA?

Hello all, My question is should I transfer all of my Roth TSP into my Roth IRA?

First, I think this is possible...is it?

Second, my Roth TSP only goes along with the market, while my Roth IRA also gets dividends and cap gains payments through out the year. For me it was around $12k. Why wouldnt I transfer it and make more on the dividends and capital gains? I'm I missing something?

Thanks for the help!
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Old 02-11-2019, 03:20 PM   #2
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On the private side, this depends on the account custodian and the details of the plan 401k plan. Many times, the answer is that it's possible and a good idea to move Roth funds from a 401k into a personal Roth IRA. Reasons include lower fees and better selection of investment choices. Typically, the plans don't allow this until the employee has left the company.



That being said, I just did a quick search and saw one page that indicated that one may not be able to remove just the Roth TSP portion if there was a mix of Roth TSP and regular TSP (the page said the withdrawal would be proportional across both types).


I think your best bet is to make the call to the TSP customer support and ask them. They'll know your specific situation, whereas, we here on this forum are dealing with scant information about it.
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Old 02-11-2019, 03:38 PM   #3
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Thanks, I didn't even think about that. Also, I just read that we have to leave it in TSP until we seperate or pay a penalty fee. So never mind, unless someone else knows something different.
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Old 02-11-2019, 04:17 PM   #4
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Most of the TSP funds (C, S, I, etc.) get dividends and capital gains, it's built into the share price. Might want to compare fund fees before switching, TSP fees are very low. The TSP is also making much needed changes to the withdrawal options to try and stop people from moving their funds out of the TSP, it's suppose to be implemented in September of this year.

From TSP:

Quote:
Dividends and Capital Gains
Under the Internal Revenue Code, earnings in the TSP and other similar defined contributions plans (e.g., 401(k) plans) are not taxable income, nor is the tax treatment different for interest, dividends, capital gains, or tax-deferred contributions when money is withdrawn from the plan. Therefore, there is no need to report dividends and capital gains separately for tax-deferred accounts.

BlackRock Institutional Trust Company, N.A, which manages the index funds in which the F, C, S, and I Funds are invested, credits interest and dividend income each business day. This income is then reflected in the TSP share prices.

The daily change in TSP share prices reflects all investment income (interest on short-term investments, dividends, capital gains or losses, and securities lending income) net of TSP administrative expenses.
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Old 02-11-2019, 04:44 PM   #5
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Thank you!
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Old 02-11-2019, 05:11 PM   #6
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Thank you!
Probably be easier when the rules change in September, but have not looked at the details.
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Old 02-11-2019, 07:58 PM   #7
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Yes when the rules change you can transfer Roth portion of TSP without moving the tax deferred portion.
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Old 02-11-2019, 09:02 PM   #8
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Quote:
Originally Posted by rjwassink67 View Post
Hello all, My question is should I transfer all of my Roth TSP into my Roth IRA?
. . . .
Second, my Roth TSP only goes along with the market, while my Roth IRA also gets dividends and cap gains payments through out the year. For me it was around $12k. Why wouldnt I transfer it and make more on the dividends and capital gains? I'm I missing something?
Think really hard before you do this. Yes, I think you may be missing something.

1) Which TSP fund(s) are you invested in? Any TSP fund that is invested in equities >does< benefit from the dividends paid by those equities. The shares in the TSP also (generally) increase in value (that is, accrue capital gains), and any equities sold by the funds that had a gain >do< go into your account.

2) What fund(s) are your Roth IRA invested in, and where are you keeping them (i.e. with a broker, with a mutual fund company, etc). The TSP funds have exceptionally low costs and fees. There are now a few funds with lower costs, but they are not the norm.

Is there, perhaps, someone suggesting that moving these funds might be a good idea? Brokers and financial advisors sometimes do this for the wrong reason (i.e. to increase the assets that they are managing, and thus the fees the clients pay them).

The TSP is a great, but not perfect, program. I would >strongly< urge you not to close out your TSP account (leave money in it even if you decide to move most of your money out). If you close your account after you leave government service, you can never open one again. If you leave it open, you can later transfer funds from another employer's 401K, etc. There are reasons you may later want to do this. The G Fund in particular is unique, and there are very good reasons you might want to use it as a portion of a broader asset allocation strategy.

Also, separate from the TSP issue, any transfer of funds from the TSP or a 401K to an IRA is something you want to carefully think through. There are state-specific differences in the legal protections afforded to 401Ks and IRAs (when there's a difference, the IRAs generally get less protection form lawsuits, divorce settlements, etc). Also, under some circumstances you may be eligible for unlimited penalty-free withdrawals from a 401K as early as age 55 1/2, whereas you'd need to wait until age 59 1/2 for similar access to funds in an a IRA.

Unless you understand the unique things about the TSP and are sure you understand the ramifications of moving the funds, I'd urge you to hold off on making any moves.
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Old 02-12-2019, 04:39 AM   #9
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This is why I love coming here for answers! Thank you all.

Roth TSP - Lifecycle 2040
Roth IRA - USAA 2040

I will be leaving my TSP as is and not moving it to moth IRA.
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Old 02-12-2019, 06:21 AM   #10
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Here is another vote for the TSP. Compare apples to apples and you will see that your total return is fine and includes dividends.
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Old 02-12-2019, 08:25 AM   #11
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Originally Posted by rjwassink67 View Post
This is why I love coming here for answers! Thank you all.

Roth TSP - Lifecycle 2040
Roth IRA - USAA 2040

I will be leaving my TSP as is and not moving it to moth IRA.
Just a note:

The costs/fees you pay for each fund:
TSP Lifecycle 2040 (in 2017): .04% (so, $4 per year for each $10,000 in your account)
USAA 2040 (per prospectus): .80% (so, $80 per year for each $10,000 invested). USAA can reduce this amount, and generally they do. For example, total net expenses in 2017 were about .03%.


I used to have funds with USAA, but no longer do. There are far worse places to keep your money, but they are not an exceptionally low-cost place for this. We'll have to see what the future brings, as they are selling off their investment business to another company (you'll still talk to USAA employees when you call, but USAA won't be managing the fund).
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