To Combine Or Not To Combine...

I am a military retiree, and newly hired federal employee. Therefore, my question is...

1. Should I combine my military Traditional TSP with my civilian TSP, and continue to build upon the military TSP nest egg?

From my understanding, my tax-exempt combat pay earnings cannot transfer over, and must remain in my military Traditional TSP.

From my understanding, I cannot transfer my military Traditional TSP into a civilian Roth. Therefore, if I do combine my military TSP with my civilian TSP, my civilian TSP would have to be designated as a Traditional TSP.


2. Do I keep my accounts separate, giving me the opportunity to open a Roth TSP?

From my understanding, my 5% match will not go into the Roth, but remain in the Traditional side.


Would that go into my military TSP?

Or, do Military and Civilian TSP accounts have both a Traditional and Roth side of the account? I don't know what it looks like once logged in.


It makes sense to combine my military TSP with my civilian TSP... making it a Traditional TSP... thus building upon both my military TSP nest egg in its entirety and the 5% match... all in one place. But then again, tax-free earnings with a Roth are quite attractive... although I'd be building that nest egg from the ground floor, leaving my military TSP nest egg dormant as far as contributions go.

Do I correctly understand my options here? Although I am leaning towards keeping the accounts separate and going with a civilian Roth, I'd appreciate any advice you may have to offer from your own experience. Thank you!

you should PM BMNEVEU, he was planning to start up a blog covering some of the same military questions.

Thanks!

Rod,

I'm bringing your questions back to the top hoping someone else out there can help. You have some good questions and I'm still doing some research to try and get some answers.

One question is how long do you think you will stay a federal employee? Could make a difference on whether you combine military and civilian. One advantage would be that you will be increasing the overall size of your combined TSP by adding the 5% matching and whatever you add per pay. Obviously the larger the account the more you profit/loss you have.
Hopefully your questions are not time sensitive.

Thank you! Because I don't need the job to make ends meet, I have no idea how long I will be a federal employee. Although it's a full time job, it's something to keep me busy in "retirement." Right now, I am contributing 5% in the Roth.

Rod,

Things have been crazy at work and home haven't done much research.

For the moment I would say that the Roth is a good idea since rates are low currently and who knows what the future holds.

Currently keeping your accounts separate might be the best idea. Try to maintain them the best you can and get a little more research under your belt for a better decision in the near future.

Good luck

Math works out the same on the absolute numbers. The division between ROTH and traditional in each account might muddle the processes at time of withdrawal, but a $100K in a Military account and $100K in a Civilian account will grow at the same rate of a $200K account as long as the contributions are the same. I have both. It fits my current risk profile. One of these days I will put them in an IRA where I won’t be constrained to 2 IFTs a month. Having the two accounts means you have to remember to make 2 updates. More hassle for some, an opportunity to diversify and tweak for others. Depends on how you want to approach your particular TSP situation.