WSJ and keeping/transferring your IRA to employer's system

[deserat]

The WSJ had an article today about employers wanting leaving employees to keep their IRAs in their plans (paywall): https://www.wsj.com/articles/youre-...k-keep-working-11551970800?mod=hp_featst_pos2

It features the TSP system as one of the employer plans and says the TSP has the lowest fees of all (even VG?). I have a question and am looking for advice.

I have funds in both VG (self and employer based) and TSP and may have an opportunity to gain access to using TSP again for a few years (employee and employer contributions). I was wondering if I should move some of my VG IRAs to TSP. My main issue is the TSP does have limited funds and they manage them themselves. With VG and my employer IRA I have access to their financial planning calculators which I have liked to use as one of my 'data' points for planning and other purposes. I don't think TSP has something similar.

So, would you move assets to TSP from VG? Would you stay the course? How do I find out if TSP has lower fees than VG (I know fees are listed, so this may just be a lazy question on my part)? Are there any intangibles I should take into account?

 

[ziggy29]

I contributed to TSP for 3+ years as a postal worker until last summer. I still have a balance there but have not moved other retirement funds over at this time. As long as I keep my money in the plan, I can still do so in the future.

The low fees are great (as is access to the G Fund) but TSP has some more restrictive rules about withdrawals from most private 401K/403B plans, so that needs to be taken into account as well. There is talk about relaxing those rules to encourage people to keep/move their retirements to TSP, but to my knowledge nothing has been done yet.

 

[pb4uski]

.... So, would you move assets to TSP from VG? Would you stay the course? How do I find out if TSP has lower fees than VG (I know fees are listed, so this may just be a lazy question on my part)? Are there any intangibles I should take into account?

No, I would not bother. The ER difference is not enough to make it worthwhile and you have more control and investment options with VG.

The ER of the C Fund is 0.032% and the ER of VFIAX or VOO is 0.040%... that's a whopping $8 on every $100,000 invested.

https://www.tsp.gov/PDF/formspubs/FundC.pdf
https://investor.vanguard.com/mutual-funds/profile/VFIAX

 

[ziggy29]

No, I would not bother. The ER difference is not enough to make it worthwhile and you have more control and investment options with VG.

The ER of the C Fund is 0.032% and the ER of VFIAX or VOO is 0.040%... that's a whopping $8 on every $100,000 invested.

That's what I decided in terms of not moving more of my retirement to TSP.

That said, the G Fund is an attractive place to park the cash portion of your retirement portfolio. Other than that, yes, I don't see anything compelling enough to endure the hassle of moving it. In fact, maintaining access to the G Fund is the main reason I left $10K in my TSP account -- if not for that, I'd probably transfer it out.

 

[cathy63]

It's worthwhile to move part of your IRA into your TSP account in one specific circumstance. If your IRA has a mix of pre- and post-tax contributions in it, you are allowed to roll the pre-tax portion into a 401K. Once you do that, you only have post-tax money left in the IRA and you can immediately do a Roth Conversion of the full amount without paying any additional tax. Then later on, when you are no longer employed by the government, you can roll over the entire TSP amount into an IRA if you want to.

 

[samclem]

That said, the G Fund is an attractive place to park the cash portion of your retirement portfolio. Other than that, yes, I don't see anything compelling enough to endure the hassle of moving it. In fact, maintaining access to the G Fund is the main reason I left $10K in my TSP account -- if not for that, I'd probably transfer it out.

+1. The G Fund is not available outside of the TSP, and has some attributes that very useful. Also, we don't know what new withdrawal

options the TSP will finally roll out, maybe (unlikely, but maybe) there will be something there that can't be replicated in an IRA.
Regardless, I'd recommend always leaving enough money in your TSP so the account remains open and you can transfer money back in--once the account is closed, you can never open a new one unless you get a gummint job. When I joined the USAF, we had a fairly crummy dollar-matching program for paying tuition. I wasn't much interested, but I put $50 in one time. That got my foot in the door, and it later morphed into a much better program and because I was signed up I could participate in the newer program without jumping through any hoops. So, keeping your options open can pay off.

 

[RE2Boys]

There is talk about relaxing those rules to encourage people to keep/move their retirements to TSP, but to my knowledge nothing has been done yet.

Talk?? The TSP Modernization Act was passed in 2017. See this for the changes, many of which will be implemented this year: https://www.tsp.gov/PDF/formspubs/tspfs10.pdf

Perfect for me as I need to start RMDs in 2020. Just finished moving a small 401k plan to the TSP. Though still have a SEP IRA at Vanguard. Since I have a basis in the SEP IRA, I'm not going to do anything to increase the IRA as it would make it more difficult to reclaim that basis via Roth conversions.

 

[donheff]

As reported by RE2Boys, the TSP is offering new options this year. I transferred an external IRA (American Funds) to the TSP because I wanted to put it in the G Fund. DW and I use the TSP G as a cash equivalent super bond/MMF. I probably wouldn't bother moving from VG to TSP for other funds.

 

[zinger1457]

Another thing to consider is if you will need or want access to the funds in the IRA between 55-59.5 years old. The TSP does give you the ability to access those funds earlier than the IRA without penalty as long as you retired from the gov in the year you turn 55 or later.

 

[deserat]

Thanks all for your insight - basically, I have a fairly large position already in TSP due to my Reserves duty (I am now 'gray-area retired - awaiting pay). I have a tentative GS job offer for 3-5 years and will be using TSP in that case for tax deferred and Roth. That will effectively make my portfolio half VG-half TSP.

And, the 'going back to work' rationale is for another thread