Roll a TSP into a Traditional IRA and then convert to a Roth IRA?

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I will retire in 2018 and will not need my TSP for at least 5 years – maybe longer. I was thinking of rolling part of my TSP into a traditional IRA, then converting it to a Roth IRA. I’m aware that I will pay taxes up front, but then it will grow tax free after that. Is this even possible and if so, what would it take to come out ahead?

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Posted by (Questions: 1, Answers: 0)
Asked on December 1, 2017 12:37 am
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Yes, it is possible. Whether you will “come out ahead” depends on many things. First, you will pay tax on everything you convert from the IRA. Second, if you begin withdrawing from the Roth in five years, you may not have enough in tax free growth to make up for the taxes you paid. Of course, we do not know that for sure, as we do not know the returns you will see on the investments you choose for the Roth. And, we do not know what the tax situation will be in five years.
You could always do a partial rollover (if you have not already taken an age-based withdrawal) to a Roth and let the money grow for longer than 5 years. If the recently passed legislation that liberalized TSP withdrawals is implemented before you retire, you would have more flexibility in your rollovers.
Sorry I could not be more helpful on whether or not it makes sense, but there are a lot of unknowns out there.

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Posted by (Questions: 0, Answers: 61)
Answered on December 1, 2017 11:00 am