401k or Traditional IRA
I have a friend that recently attended a retirement workshop for federal employees. His wife works for the FDA and they plan to retire in 2018. She has a TSP (401k). The presentation recommended rolling the TSP 401k into an IRA. His main concerns for converting are the tax deferred transfer to spouse upon death and the tax reduction strategies for children and grandchildren.
My understanding is that a surviving spouse can either leave the 401k in place upon the death of their spouse or roll it into an IRA without tax consequences similar to inheriting an IRA.
As far as children/grandchildren strategies, they also seem similar to an inherited IRA ( cash out and be taxed, 5-year distribution and taxed or stretch the distributions (72t rules) and be taxed. The last option may be dependent on the rules of the individual 401k plan.
DH has a TSP (retired post office). We both have IRAs as well, so I just want to make sure we are being prudent in leaving his TSP in place rather then transferring to an IRA.
"Tell me, what is it you plan to do with your one wild and precious life?" - Mary Oliver