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Thread: How to put $29500 in the TSP?

  1. #1

    Default How to put $29500 in the TSP?

    I contribute $18,000 plus $6000 for the catch up.

    Question: Can I take $5500 from my checking account, then open and fully fund a traditional IRA today, turn around and use form TSP 60 to rollover/transfer that money into my TSP a few days later? Then do the same thing each year between 2016 and my retirement date 2022?


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  3. #2

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    Default Re: How to put $29500 in the TSP?

    Quote Originally Posted by yawdert View Post
    I contribute $18,000 plus $6000 for the catch up.

    Question: Can I take $5500 from my checking account, then open and fully fund a traditional IRA today, turn around and use form TSP 60 to rollover/transfer that money into my TSP a few days later? Then do the same thing each year between 2016 and my retirement date 2022?
    check with your financial advisor, but I believe the $18K + $6K is the total allowed from all sources.
    But that is a good problem to have!!
    There are 10 types of people in the world. Those who know binary, and those that don't!!
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  5. #3

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    Default Re: How to put $29500 in the TSP?

    This may help answer your question, yawdert. http://finance.zacks.com/tsp-contrib...-ira-1233.html

    basically, the benefits of doing what you propose may depend on whether your trad ira contributions are deductible or not. If they are non-deductible due to your income level, then rolling the non-deductible trad ira contributions might cause you to end up paying taxes on them twice, once when you put them in the non-deductible ira, and second time when you pull them out later from tsp. at least that would be my prognosis. perhaps best to consult a tax advisor on that one, I'm not one.

    I rolled my non-deductible trad ira into roth-conversion account years ago when market was low (early 00s), had to pay taxes because I also had a separate older trad ira (deductible) account. to do that particular rollover, I had to calculate total (deductible+nondeductible) and pay taxes on proportion of total that I rolled that represented deductible part of the total trad ira, even tho I kept them in separate accounts for tracking up to that point. be careful, check for tax consequences now and later both. If you roll nondeductible trad ira into tsp, you will have to pay taxes now on the nondeductible contributions to trad ira, and then pay taxes again later when you pull them out of taxed tsp. I think.
    "life can only be understood backwards, but it must be lived forwards" - soren kierkegaard

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  7. #4

    Default Re: How to put $29500 in the TSP?

    If you meet the income limitations for contributing to a Roth IRA you should be able to do this. Transfer your 2016 Roth account to a TSP Roth account. If you have traditional IRA that will probably cause a complicated tax situation similar to what Alevin describes. Best just to keep your Roth or traditional IRA separate from your TSP. That's what I do. $24K to TSP and $6.5K to Roth IRA every year since age 50 for a total of $30.5K invested.

    Quote Originally Posted by alevin View Post
    This may help answer your question, yawdert. Do TSP Contributions Affect an IRA? | Finance - Zacks

    basically, the benefits of doing what you propose may depend on whether your trad ira contributions are deductible or not. If they are non-deductible due to your income level, then rolling the non-deductible trad ira contributions might cause you to end up paying taxes on them twice, once when you put them in the non-deductible ira, and second time when you pull them out later from tsp. at least that would be my prognosis. perhaps best to consult a tax advisor on that one, I'm not one.

    I rolled my non-deductible trad ira into roth-conversion account years ago when market was low (early 00s), had to pay taxes because I also had a separate older trad ira (deductible) account. to do that particular rollover, I had to calculate total (deductible+nondeductible) and pay taxes on proportion of total that I rolled that represented deductible part of the total trad ira, even tho I kept them in separate accounts for tracking up to that point. be careful, check for tax consequences now and later both. If you roll nondeductible trad ira into tsp, you will have to pay taxes now on the nondeductible contributions to trad ira, and then pay taxes again later when you pull them out of taxed tsp. I think.

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  9. #5

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    Default Re: How to put $29500 in the TSP?

    TSP does not accept transfers from Roth IRAs but you can contribute to Roth IRA in addition to maxing out TSP contributions if your AGI is <$131K Single/HoH, higher if Married - https://www.irs.gov/publications/p59...link1000230977

    Deductible amount is much lower for Traditional IRA if you are covered by a retirement plan: Single/HoH AGI <$61K
    https://www.irs.gov/publications/p590a/ch01.html#en_US_2015_publink1000230467

    Ref: https://www.irs.gov/retirement-plans/traditional-and-roth-iras & https://www.tsp.gov/PlanParticipatio...l#transferring

    P.S. Over 50, max would be $30,500=$24K + $6,500 Roth

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    Default Re: How to put $29500 in the TSP?

    Quote Originally Posted by yawdert View Post
    I contribute $18,000 plus $6000 for the catch up.

    Question: Can I take $5500 from my checking account, then open and fully fund a traditional IRA today, turn around and use form TSP 60 to rollover/transfer that money into my TSP a few days later? Then do the same thing each year between 2016 and my retirement date 2022?
    My reading skills aren't perfect but please-where did yawdert say anything about a Roth IRA? Anyone know the answer to the actual question about a traditional IRA?

    Bold and underline are my edit.

    PO

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    Default Re: How to put $29500 in the TSP?

    PO, the link I provided talked about tsp+trad. My point to yawdert is that transferring trad ira into tsp can be complicated even if allowed. depends whether the trad ira has non-deductible contributions or not.
    "life can only be understood backwards, but it must be lived forwards" - soren kierkegaard

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  15. #8

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    Default Re: How to put $29500 in the TSP?

    Quote Originally Posted by PessOptimist View Post
    My reading skills aren't perfect but please-where did yawdert say anything about a Roth IRA? Anyone know the answer to the actual question about a traditional IRA?

    Bold and underline are my edit.
    PO
    If you make less than $61K, traditional IRA is possible, which could be rolled over to TSP. If you are contributing $24K annually, however, it seems unlikely that your AGI will be less than $61K--technically it is possible if your salary was $85K or less as TSP contributions are not included in income and you have no other income.
    Deductible amount is much lower for Traditional IRA if you are covered by a retirement plan: Single/HoH AGI <$61K https://www.irs.gov/publications/p590a/ch01.html#en_US_2015_publink1000230467
    Roth IRA has advantages in that you are not required to take RMDs and distributions are tax free. Whether you contribute to Regular or Roth IRA or combination of both, the limit is $6,500 if you are over 50 years old.

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    Default Re: How to put $29500 in the TSP?

    Also you have until April 15th of 2017 to fund IRA for 2016, which is beneficial if you are close to the threshold limits. You would also need to check to make sure there are no time restrictions on when you can transfer IRA from where you open the account. Most financial institutions want you to keep your money with them and may have some restrictions when you open an account.


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  19. #10

    Default Re: How to put $29500 in the TSP?

    Thanks for all the responses. 2016 was my first year for the catch-up. IRA is $6500 not $5500. The thread title should have read, "How to put $30,500 in the TSP". My tax status is Married filing Jointly. My wife is covered by a retirement plan.
    married filing jointly or
    qualifying widow(er)
    $98,000 or less a full deduction.
    more than $98,000
    but less than $118,000
    a partial deduction.

    We fall into the partial deduction category I think. I'm not sure what MAGI is as opposed to AGI. A partial deduction is great, but might make things complicated with a transfer/rollover into the TSP. If that's the case, should I just open and fully fund a Roth IRA for the next 6 years?

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  21. #11

    Default Re: How to put $29500 in the TSP?

    For most people MAGI=AGI. A partial deduction traditional IRA will allow for partial tax free withdrawals in the future. However, if you transfer it to the TSP you will lose any partial tax free withdrawal status. I recommend to fully fund the ROTH for six years and keep it simple. If you let it grow for 20 to 30 years you will appreciate the tax free status at withdrawal time.

    Quote Originally Posted by yawdert View Post
    Thanks for all the responses. 2016 was my first year for the catch-up. IRA is $6500 not $5500. The thread title should have read, "How to put $30,500 in the TSP". My tax status is Married filing Jointly. My wife is covered by a retirement plan.
    married filing jointly or
    qualifying widow(er)
    $98,000 or less a full deduction.
    more than $98,000
    but less than $118,000
    a partial deduction.

    We fall into the partial deduction category I think. I'm not sure what MAGI is as opposed to AGI. A partial deduction is great, but might make things complicated with a transfer/rollover into the TSP. If that's the case, should I just open and fully fund a Roth IRA for the next 6 years?

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  23. #12

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    Default Re: How to put $29500 in the TSP?

    Quote Originally Posted by Skorcher View Post
    For most people MAGI=AGI. A partial deduction traditional IRA will allow for partial tax free withdrawals in the future. However, if you transfer it to the TSP you will lose any partial tax free withdrawal status. I recommend to fully fund the ROTH for six years and keep it simple. If you let it grow for 20 to 30 years you will appreciate the tax free status at withdrawal time.
    I agree with Scorcher. I wish I had started funding Roth sooner. If you have been maxing out your contributions for awhile and you are now also maxing the catch up, you should have a sizable account that you will be paying taxes on. Suggest you play with the TSP retirement income calculator with different assumptions: https://www.tsp.gov/PlanningTools/Ca...alculator.html The regular IRA is designed to be liquidated over your lifetime, look at what happens at age 70.5 when minimum required distributions (RMD) kick in. What I like about the Roth is that you don't have RMDs and your beneficiary(ies) also get benefit of tax free earnings. Withdrawal rules are a little different, so just be aware of 5 year rule & 59.5 age requirements on withdrawals Roth IRA Withdrawal Rules I like the fact that I could withdraw my contributions at any time without penalty, so it is kind of like a secondary emergency fund.

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