Before blanket statements are made comparing Roth to Regular TSP you must know EXACTLY how the state you work in now taxes the pension of a federal civil servant. Approx. 9 states that normally have income taxes (e.g. NY and PA) consider the TSP "part of" their civil servants pension and DO NOT tax it on withdrawal in retirement. This is significant because if you work in one of these states (and assuming you will retire there) and contribute to the regular TSP - you can escape state taxes altogether (which are not insignificant in states like NY) by contributing to the regular TSP. As unbelievable as it seems the money is not state taxed going into the regular TSP AND it is not state taxed when withdrawn as it is considered "part of" the civil servants pension in these states. However - if you contribute to the Roth TSP - you will pay state taxes on the money going in. Everything else being equal- you are actually losing money by contributing to the Roth TSP instead of the regular TSP in these states.
Nice, thanks! I came across your video for the first time. How would you advise a disabled veteran to invest a disability check that is tax-free in an investment firm? What type of account should be opened so we don't pay tax on tax-free disability checks. Thanks
I recently switched my TSP from traditional to Roth. I also opened a Roth in a brokerage account to purchase stock, etc. Brokerage said max across all IRAs is $7k. But TSP says max is $22,500 and an additional $7,500 if over 50. I'm confused as to what i can put in the brokerage account now.
Yeah. I only have $60k in my TSP, all traditional. I've started to use the Roth side for future contributions, so yeah. The TSP just adds those traditional Roth contributions into the $60k traditional that I already had in there plush the automatic 5% match into the Traditional side. I'm assuming that I will owe less taxes when everything is said and done
From watching your video, I know that I can't make a penalty fee transfer from my traditional civilian TSP to an IRA until I'm 59 1/2 years old. I am currently 55 and retired from the military at age 45. For my Uniformed Service TSP, is that treated any differently? Am I able to transfer money from my Uniformed Service TSP to a traditional IRA without penalty?
can you explain how to set up an IRA account? i want to withdraw all my money from TSP and put into an IRA...i am separated from gov't service and i meet the age requirement.....thanks
Call or go online to your brokerage of choice (Vanguard? Schwab? Fidelity?) and open the IRA. Then call the TSP Thriftline and tell them you want to transfer some of your funds into that IRA. They will walk you through the process, which does take a few weeks and involves your brokerage filling in part of the form and getting your signature notarized.
Thank you for your question. Please send us your contact information on this form plan-your-federal-retirement.com/submit-questions/ so we can have one of our advisors contact you and provide you with detailed information regarding your question. The PYFR Social Media Team
Use the TSP form 70 if you want to do a full amount conversion, and use the TSP form 77 if you plan to do a partial conversion over several years. Whatever you do, will be taxed and you may or may not jump to a newer tax bracket, as they treat this as earned income without IRS penalty if you do an institutional transfer. No penalty if your over 59.5 years old, but you still pay the taxes and it goes on your 1040 as income. Hope that muddied the water enough.
It can take several weeks for the full process of transferring funds from TSP to an IRA or Roth IRA. But once it’s transferred into a regular IRA and you have opened a Roth IRA with the same brokerage, you can transfer funds to the Roth, in other words do a conversion, quickly. (Same day, I think?) Among other things, this allows you the option of waiting until late December to do the year’s final conversion once you have a solid estimate of your tax situation for the year. Or to do a conversion at the moment you judge your holdings might be at the lowest value for the year, to take advantage of the lower taxes on that lower value. (Ideally you would be paying that tax with non-retirement cash, so that this transaction would be market-neutral and not result in locking in the year’s lowest sales price for your holdings.)
Hello, I max my TSP contributions and a Vanguard Roth. Can I contribute to the TSP Roth up to my annual max? If so, how? I don't see that option on myPay or on the TSP site. I'm paying too much in taxes and I won't need this money until after I'm retirement age.
You could instead fund your Roth TSP, instead of the Traditional TSP. You could also fund a Roth IRA if you are under the income limits to do so. Otherwise, in order to do Roth conversions on money you have in your TSP, you would have to wait until you were over Age 59.5 to do an in-service distribution while still working.
hello, would I be able to transfer/rollover my tsp to any brokerage that offers roth ira (ie. Fidelity)? basically I want to open up a a roth ira account where I can manage individual stocks. I don't have much on my tsp account and being separated from the service for a few years now, money inside the tsp hasn't really done much, hence why I just want to close my tsp. thanks!
Yes, you can. What will happen though is that you will pay taxes on your traditional tsp, so make sure you don't jump to a new tax bracket. You can do this over several years if you wish, to avoid the tax burden created. Most important tip here is to make sure you do it as an INSTITUTIONAL TRANSFER. Contact the holder of your IRA, and have them walk you through the steps. What you don't want to have happen is for TSP to cut you a check, because then I believe you have 30 days to get that check placed in your Roth IRA. Fill out form 70 from tsp if you want to do all of it, and fill out form 77 if you plan to do it in steps over several months or years. I am due to retire from the Feds in a cpl years, and opened a Roth to start building as I get closer to SS distributions. I plan to use the traditional portion of TSP during the runup to the point I finally choose my SS. Hope this helps.
Can I transfer funds from my ROTH IRA to my ROTH TSP? If so, I can do transfer from Traditional TSP to my Roth IRA, then from the Roth IRA to my Roth TSP?
What if your end goal is to use your TSP for income (dividend payouts). When you retire can you transfer the TSP to an IRA, then inside the IRA purchase good dividend paying stocks for income? The thinking here is while your working take money and invest in the tsp and at the same time put money in a brokerage account where you invest in growth stocks and funds. Fast forward to retirement - take the brokerage account money and put a down payment on a house, transfer the tsp to an IRA and buy dividend paying stocks to pay the mortgage.
The downside to that is that in a regular, taxable brokerage account, dividends get special tax treatment like long-term capital gains do, maybe 15% or even 0% if your AGI is low enough. But in an IRA there is no such rate. All taxes are deferred until you take money out, and then those funds are taxed as regular income at your full marginal income tax rate for that year. This still might be reasonable, but if you do have money outside retirement accounts, that might be a better place to hold dividend-paying stocks.
i do not understand why you are recommending to transfer more money to traditional ira than you are planning on rolling over to roth. for example , if your eventual goal for 1 year is to roll over 30,000 dollars into a roth ira than just transfer that same amount from TSP to traditional ira to begin with . the reason this seems important to me, is if you have additional money left over in a traditional ira after converting some of it to a roth ira, then you are subject to pro rata rule and have to pay extra taxes.
That sounds great to open a Roth IRA. However, my TSP is more actively earning dividends & many banks Roth IRA's can not compare to the dividends earnerd in TSP. I still can open Roth IRA just to avoid paying some tax in future on my IRA's. Hopefully, TSP will change the rules in future??
Your background music is so distracting! I loved all the informer you provided though
Thanks for the input Satinder--we actually removed the music from our new videos and will continue to leave it out.
Great video. Good information regarding the Roth IRA.
Glad it was helpful!
Thanks Micah! Finally a breakdown of the TSP that I can actually understand!
No problem Nolan, I'm glad you liked it!
thanks for the information - nicely explained
Before blanket statements are made comparing Roth to Regular TSP you must know EXACTLY how the state you work in now taxes the pension of a federal civil servant. Approx. 9 states that normally have income taxes (e.g. NY and PA) consider the TSP "part of" their civil servants pension and DO NOT tax it on withdrawal in retirement. This is significant because if you work in one of these states (and assuming you will retire there) and contribute to the regular TSP - you can escape state taxes altogether (which are not insignificant in states like NY) by contributing to the regular TSP. As unbelievable as it seems the money is not state taxed going into the regular TSP AND it is not state taxed when withdrawn as it is considered "part of" the civil servants pension in these states. However - if you contribute to the Roth TSP - you will pay state taxes on the money going in. Everything else being equal- you are actually losing money by contributing to the Roth TSP instead of the regular TSP in these states.
Nice, thanks! I came across your video for the first time. How would you advise a disabled veteran to invest a disability check that is tax-free in an investment firm? What type of account should be opened so we don't pay tax on tax-free disability checks. Thanks
Thank you so much, Job very well done.
Thank you too!
I recently switched my TSP from traditional to Roth. I also opened a Roth in a brokerage account to purchase stock, etc. Brokerage said max across all IRAs is $7k. But TSP says max is $22,500 and an additional $7,500 if over 50. I'm confused as to what i can put in the brokerage account now.
You may contribute *$7,500* to your 2023 Roth IRA and *$30,000* to your Roth TSP.
What form can I used to do the transfer from my traditional TSP to outside IRA please
Have you tried entering "withdrawal form" at TSP search box? TSP Form 99
Yeah. I only have $60k in my TSP, all traditional. I've started to use the Roth side for future contributions, so yeah. The TSP just adds those traditional Roth contributions into the $60k traditional that I already had in there plush the automatic 5% match into the Traditional side. I'm assuming that I will owe less taxes when everything is said and done
Are there RMDs for the tsp?
Yes at age 72.
What does RMD stand for? Thanks
@@Ree-vn9dc Required Minimum Distributions (RMD)
@@rickw3243 ok thanks
From watching your video, I know that I can't make a penalty fee transfer from my traditional civilian TSP to an IRA until I'm 59 1/2 years old. I am currently 55 and retired from the military at age 45. For my Uniformed Service TSP, is that treated any differently? Am I able to transfer money from my Uniformed Service TSP to a traditional IRA without penalty?
Great question. You should only be able to make in-service, age 59.5 withdrawals from the TSP in which you are actively employed (civilian).
Thanks for the helpful info but the music is a distraction.
can you explain how to set up an IRA account? i want to withdraw all my money from TSP and put into an IRA...i am separated from gov't service and i meet the age requirement.....thanks
Call or go online to your brokerage of choice (Vanguard? Schwab? Fidelity?) and open the IRA. Then call the TSP Thriftline and tell them you want to transfer some of your funds into that IRA. They will walk you through the process, which does take a few weeks and involves your brokerage filling in part of the form and getting your signature notarized.
Thank you for your question. Please send us your contact information on this form plan-your-federal-retirement.com/submit-questions/ so we can have one of our advisors contact you and provide you with detailed information regarding your question.
The PYFR Social Media Team
What are the cons of doing conversions directly from TSP to ROTH IRA?
Any amount from the tsp to a Roth IRA is taxed as ordinary income.
Use the TSP form 70 if you want to do a full amount conversion, and use the TSP form 77 if you plan to do a partial conversion over several years. Whatever you do, will be taxed and you may or may not jump to a newer tax bracket, as they treat this as earned income without IRS penalty if you do an institutional transfer. No penalty if your over 59.5 years old, but you still pay the taxes and it goes on your 1040 as income. Hope that muddied the water enough.
It can take several weeks for the full process of transferring funds from TSP to an IRA or Roth IRA. But once it’s transferred into a regular IRA and you have opened a Roth IRA with the same brokerage, you can transfer funds to the Roth, in other words do a conversion, quickly. (Same day, I think?) Among other things, this allows you the option of waiting until late December to do the year’s final conversion once you have a solid estimate of your tax situation for the year. Or to do a conversion at the moment you judge your holdings might be at the lowest value for the year, to take advantage of the lower taxes on that lower value. (Ideally you would be paying that tax with non-retirement cash, so that this transaction would be market-neutral and not result in locking in the year’s lowest sales price for your holdings.)
Hello, I max my TSP contributions and a Vanguard Roth. Can I contribute to the TSP Roth up to my annual max? If so, how? I don't see that option on myPay or on the TSP site. I'm paying too much in taxes and I won't need this money until after I'm retirement age.
Yes you may contribute maximum $22,500 to Roth TSP however this will not address you complaint about paying too much in taxes.
So if I’m under 59 1/2 and still employed, my only option is to open a IRA and start contributing?
If employer offers 401(k) [or similar workplace retirement plan] you may contribute to that 401(k).
You could instead fund your Roth TSP, instead of the Traditional TSP. You could also fund a Roth IRA if you are under the income limits to do so. Otherwise, in order to do Roth conversions on money you have in your TSP, you would have to wait until you were over Age 59.5 to do an in-service distribution while still working.
hello, would I be able to transfer/rollover my tsp to any brokerage that offers roth ira (ie. Fidelity)? basically I want to open up a a roth ira account where I can manage individual stocks. I don't have much on my tsp account and being separated from the service for a few years now, money inside the tsp hasn't really done much, hence why I just want to close my tsp. thanks!
Yes, you can. What will happen though is that you will pay taxes on your traditional tsp, so make sure you don't jump to a new tax bracket. You can do this over several years if you wish, to avoid the tax burden created. Most important tip here is to make sure you do it as an INSTITUTIONAL TRANSFER. Contact the holder of your IRA, and have them walk you through the steps. What you don't want to have happen is for TSP to cut you a check, because then I believe you have 30 days to get that check placed in your Roth IRA. Fill out form 70 from tsp if you want to do all of it, and fill out form 77 if you plan to do it in steps over several months or years. I am due to retire from the Feds in a cpl years, and opened a Roth to start building as I get closer to SS distributions. I plan to use the traditional portion of TSP during the runup to the point I finally choose my SS. Hope this helps.
If I have a Roth TSP would I be able to rollover to a Roth IRA or would I still do a transfer?
The process is the same for the Traditional TSP as it is for the Roth TSP; you would be able to do a Transfer to a Roth IRA.
Can I transfer funds from my ROTH IRA to my ROTH TSP? If so, I can do transfer from Traditional TSP to my Roth IRA, then from the Roth IRA to my Roth TSP?
Q1 No
What if your end goal is to use your TSP for income (dividend payouts). When you retire can you transfer the TSP to an IRA, then inside the IRA purchase good dividend paying stocks for income? The thinking here is while your working take money and invest in the tsp and at the same time put money in a brokerage account where you invest in growth stocks and funds. Fast forward to retirement - take the brokerage account money and put a down payment on a house, transfer the tsp to an IRA and buy dividend paying stocks to pay the mortgage.
The downside to that is that in a regular, taxable brokerage account, dividends get special tax treatment like long-term capital gains do, maybe 15% or even 0% if your AGI is low enough. But in an IRA there is no such rate. All taxes are deferred until you take money out, and then those funds are taxed as regular income at your full marginal income tax rate for that year. This still might be reasonable, but if you do have money outside retirement accounts, that might be a better place to hold dividend-paying stocks.
When you retire you dont want to be putting down payments on a house you want to be mortgage free.
Very informative video! Can you have a TSP IRA and a civilian IRA?
Your Thrift Savings Account is akin to 401(k) and is not a TSP IRA. You may have both a TSP account as well as an IRA.
i do not understand why you are recommending to transfer more money to traditional ira than you are planning on rolling over to roth. for example , if your eventual goal for 1 year is to roll over 30,000 dollars into a roth ira than just transfer that same amount from TSP to traditional ira to begin with . the reason this seems important to me, is if you have additional money left over in a traditional ira after converting some of it to a roth ira, then you are subject to pro rata rule and have to pay extra taxes.
Does TSP allow you to make many transfers like this? I'm not familiar with the pro rata rule. I'll have to review it online.
@@RickMartinRUclips Q1 Yes. TSP relaxed rules so you may make as many $1000+ withdrawals as you wish once every 30 days.
That sounds great to open a Roth IRA. However, my TSP is more actively earning dividends & many banks Roth IRA's can not compare to the dividends earnerd in TSP. I still can open Roth IRA just to avoid paying some tax in future on my IRA's. Hopefully, TSP will change the rules in future??
Nice vid. I and seprated from service and would like to know if there are any options to convert TSP holdings into a crypto Roth ira?
sounds like all you have to do is follow his steps - visit Vanguard or Fidelity and see if they have crypto ETFs or funds -