Quote:
Originally Posted by Out-to-Lunch
... If your rate is higher now, then it is better to leave it in tax-deferred and convert later. There is no "cross-over point."
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I see, you're right. Say we're taxed 20% or $3K of $15K - we could "earn back" that $3K eventually (3-4 years minimum), but it's not like we've caught up to what the original TSP balance would have gained in that same amount of time. Well, except possibly by luck -- i.e. Vanguard has a lot more investment options than what the TSP has (BTC, for example; but that's the luck/gamble part).
Most likely yes, our income and tax rate will be lower in retirement. So you're right, just letting the $15K grow as it has been, and we can convert later as needed (i.e. same question as now, just at a higher balance).
EDIT: But if anyone knows - do they convert the full $15K and then we get the income-tax bill next April? Or do they convert $12K and withhold $3K in anticipation of the income-tax to come? ("they" being the TSP government site)
OTOH - I'm not sure how the inheritance policy between the TSP and RothIRA differ. I think the RothIRA can be inherited basically as-is. While we're in good health now, and hopefully so in 5-10 years, but things certainly can happen. My gut feel is it would be easier for our daughter to deal with Vanguard than the TSP government site.
But yes, my main thought was just the convenience of one-less-account to deal with. I've always wondered about that: we spread assets across brokers, such that if any one brokerage is compromised (internally or externally), were aren't completely screwed. Except having more accounts is increasing the chances of being compromised.
And tentatively that's my wife's thought on this: we don't work for the government anymore, maybe we should keep one government account as a kind of "backup." But my thought is kind of exactly for that reason that we no longer work for the government, they could be inclined to "erase" that account at any time and nothing we could do about it.
The decisions' hers of course, but I'd say roll it over now while we're young, get it consolidated into an account we more actively monitor -- or I fear we might forget about it, and "oops" we had a new-car sitting there, or a way to pay some medical expense, and forgot about it if we ignore it for another decade.
I'll check more into the beneficiary and inheritance policy. If a TSP can basically automatically go to our daughter should anything happen to us, then sure, I'd say just let it sit there.
EDIT: Looks like the TSP beneficiary policy is that it is just a "forced" roll-over to an IRA owned by that beneficiary. Sounds reasonable.