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Thread: TSP, stung by participants who ...

  1. #37

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    Default Re: TSP, stung by participants who ...

    Quote Originally Posted by dougscott View Post
    I agree ... but I think it's a tax thing ... you could consider incrementally converting it to a Roth. You will have to pay the tax, but you can leave the Roth, with all tax paid, to those you leave behind. At least that's what I understand.
    What I understand and have considered doing as well. Whatever portion of the tsp distribution I don't need to spend in a given year, will be added to a Roth account to grow taxfree. I might need to spend the growth later myself, and if I don't, someone else in the family would get whatever's in the account. that's me being optimistic that there will be growth and that I wouldn't need it all myself before it's over.
    "life can only be understood backwards, but it must be lived forwards" - soren kierkegaard

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  3. #38

    Default Re: TSP, stung by participants who ...

    So ... I wonder if TSP could allow participants to pay the tax on the "mandatory distribution" amount, converting it to Roth, while allowing the funds to remain in the TSP account? It seems that it should be considered a "distribution" if the tax is paid?? If we could do this in retirement, we could eventually convert the whole account to Roth and have no withdrawals. Does that make sense?? (I did not research this ... just a thought ... if anyone knows)

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  5. #39

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    Default Re: TSP, stung by participants who ...

    Quote Originally Posted by dougscott View Post
    So ... I wonder if TSP could allow participants to pay the tax on the "mandatory distribution" amount, converting it to Roth, while allowing the funds to remain in the TSP account? It seems that it should be considered a "distribution" if the tax is paid?? If we could do this in retirement, we could eventually convert the whole account to Roth and have no withdrawals. Does that make sense?? (I did not research this ... just a thought ... if anyone knows)
    The law states it must be disbursed and taxes paid. You can turn the difference into a Roth (non-TSP), but if you're retired, you can't contribute to TSP anymore.
    THIS IS WHERE I WOULD PUT SOMETHING TO REPRESENT MY THINKING, BUT THEN THEY SHOW UP!
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  7. #40

    Default Re: TSP, stung by participants who ...

    Quote Originally Posted by Frixxxx View Post
    The law states it must be disbursed and taxes paid. You can turn the difference into a Roth (non-TSP), but if you're retired, you can't contribute to TSP anymore.
    Understand ... I was trying to think of a way to "convert" and have that count as a "disbursement" without really withdrawing the funds, since TSP allows pre and post tax to commingle in the same account ... rather than withdraw TSP/IRA and then re-deposit to a separate Roth. Some incomes don't qualify to "deposit" to a Roth, but I understand anyone can convert IRA funds to a Roth. Interesting subject.

    I did find this (below) on a Kiplinger site, which indicates the tax on an IRA can be paid with outside funds, but I am still not sure if that conversion would be considered a "disbursement"...

    MYTH 7. You can’t win if you pay the conversion tax with IRA money. There’s no doubt that you’re better off if you can come up with the cash without tapping your nest egg. Using outside money to pay the tax bill effectively lets you shift money from a taxable account into a tax shelter and lets you keep more inside the Roth to enjoy glorious tax-free earnings. But using IRA money for the government’s share doesn’t necessarily make a conversion a bad deal.
    Let’s say you convert a $100,000 IRA and use $28,000 of the nest egg to pay taxes on the switch. (This assumes you’re at least age 59 1/2 so you’re not hit with the 10% early-withdrawal penalty on the funds not converted.) If the account earns 6% a year, it will hold $128,941 ten years down the road. It’s all yours. If you don’t convert, your $100,000 IRA would grow to $179,084. But if you’re still in the 28% bracket, 28% of the money is Uncle Sam’s. Peel off his share and you have the same $128,941. (This example ignores state income taxes, but if state tax rates don’t change, neither would the outcome.)
    Add other advantages of a Roth -- tax-free withdrawals in retirement can’t increase the tax bill on Social Security benefits, no mandatory withdrawals starting at age 70 1/2 (as with traditional IRAs), and anything left to your heirs goes to them tax-free rather than being taxed in their top bracket -- and it’s clear that a conversion can make sense even if you have to use IRA money to pay for it.

    Read more at 7 Myths About Roth IRA Conversions-Kiplinger

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  9. #41

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    Default Re: TSP, stung by participants who ...

    Quote Originally Posted by dougscott View Post
    I agree ... but I think it's a tax thing ... you could consider incrementally converting it to a Roth. You will have to pay the tax, but you can leave the Roth, with all tax paid, to those you leave behind. At least that's what I understand. They just don't want you to die and not pay your taxes.
    There is a limit per year I don't have that much time left and no earned income. Just gonna take so much out a month until it's gone.
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  11. #42

    Default Re: TSP, stung by participants who ...

    TSP, stung by participants who abandon it, to stress customer service - The Washington Post

    "You fire people you don’t know.”

    ---------------------------------------------

    What a strange thing to say. Tell that to a friend of mine that was fired after 8 years of working for a private company that was like FAMILY to him - only to be "let go" and thrown away like a piece of trash.

    You're either viewed as an ASSET or you're viewed as a LIABILITY. If you're seen as a LIABILITY - YOU GET FIRED.

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  13. #43

    Default Re: TSP, stung by participants who ...

    Worried about 28% tax taken out? Are you withdrawing $100,000 very year to spend? You are not spending that now, so do you expect to be spending more upon retirement. Like some rich 1% person?


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