By Mike Miles
December 9th, 2013 | Uncategorized
Q. This is a follow-up to a prior question. I had asked whether converting my Voluntary Contributions Program account to an existing contributory Roth IRA would be taxable in light of the fact that I had pretax money in the Thrift Savings Plan. You had advised that it appeared to be a nontaxable event but that I should check with my CPA. I do not have a traditional pretax IRA.
My CPA didn’t know anything about it, so I asked an expert in the field. The expert cautioned me not to roll over my pretax TSP into a traditional pretax IRA prior to the Roth conversion. This would make a portion of the conversion taxable.
This is an important point, as many financial planners will recommend to federal employees that they transfer their pretax TSP to a traditional IRA to provide greater control over investments and tax planning.
A. I have spent untold amounts of ink and breath over the past 15 years advising TSP participants not to take their money from the TSP until they have to, and to transfer money into the TSP whenever possible. I agree that it’s an important point for a variety of reasons that include the specific one you mention. Thanks for the follow-up.
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