Results 1 to 3 of 3

Thread: regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?

  1. #1

    Default regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?

    Background: over 59 1/2, still working, rolling over partial amounts from a regular TSP to a brokerage account Roth IRA.

    From lots of reading this weekend, my understanding is there are two ways to rollover regular TSP money to a Roth IRA:

    1. Direct transfer. Print the form on the TSP site, sign and get the brokerage to also sign, get it back to the TSP.
    Negative: lots of mailing / faxing, and no taxes are withheld, so then estimated taxes need to be paid (another thing to do!).

    2. Indirect rollover: Distribute an amount to myself to my checking account, then deposit into my Roth IRA specifying it as a 60 day rollover.
    Positives: simple and can all be done online. 20% taxes are withheld (a good thing as there's no need to pay estimated taxes!).

    But, I just want to make sure I'm not missing any gotchas! I'm fairly sure, but not certain, that this type of indirect rollover (regular TSP to Roth IRA) isn't subject to the once per year rule. But, I have yet to find where this is explicitly stated (and I read the entire IRS pub!). I don't want to rollover $2K, then a few months later $10K, buy out of the money call options on 3x short etf's and make a million, and then after some years find out I owe a 6% penalty on that $10k along with my million! (No, not serious, a nice fantasy though ).

    So, is it okay to just use the Indirect rollover method w/out worry? It really does seem a lot simpler. I know I'm limited to 4 withdrawals per year, but is there any reason I can't just do such a rollover 4 times if I choose?

    I'm hoping some of you have worked out a good practice for doing these partial rollovers. Thanks in advance for any guidance!!


  2.  
  3. #2

    Join Date
    Oct 2010
    Location
    Aiea, Hawaii
    Posts
    1,121

    Default Re: regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversio

    I have done several Direct Rollovers, both before I retired and after. I was always concerned about IRS disclosures that reflected the indirect rollovers. Plus, doesn’t the indirect require a 20% withholding in case you do not get the rollover done in 60 days?

    What I did was rollover Traditional to Traditional. Then do the traditional to Roth in the new company (I use Vanguard, but there are lots). Seems to go very smoothly. No hiccups.
    There are 10 types of people in the world. Those who know binary, and those that don't!!
    Retired on December 31, 2018!!

  4.  
  5. #3

    Default Re: regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversio

    Thanks for explaining how you've done it. Yes, I'm concerned too about proper documentation of the rollover, though I would imagine that the TSP would have a record of the partial distribution (say $10k as an example) and the brokerage would have a record of the deposit w/ the notation that it is a 60 day rollover (also for exactly $10k to make it as plain as possible).

    My objections to doing it directly are the paperwork -- mailing and faxing, and even that no taxes are withheld (I prefer they be withheld saving me the extra step of paying an estimated tax).

    I would think a lot of us TSP'ers would be doing regular to Roth IRA rollovers / conversions... anyone else?

  6.  

Tags for this Thread

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
SPY (C Fund) (delayed)
regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?
(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)
regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?
(Stockcharts.com Real-time)
EFA (I Fund) (delayed)
regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?
(Stockcharts.com Real-time)
BND (F Fund) (delayed)
regular TSP to Roth IRA: any gotcha's doing partial indirect rollovers (conversions)?
(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes