- April 4, 2024
- Posted by: legaleseblogger
- Category: Related News
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### Deciding What to Do with Husband’s TSP
Trying to figure out what to do with my husband’s TSP now that he’s retired. It’s in a lifecycle and he has about $100,000 in there, with the majority of it being post-tax contributions. Just let it ride or roll it over? He has a Fidelity account with a Roth IRA. We could roll it into a rollover IRA.
### Concerns About Rolling Over TSP
My issue is if we roll it over, am I understanding it correctly that he’s cashed out of the life cycle and then the money would need to be invested in something through Fidelity. Most of our money is in employer life cycles and VTI. Having $100,000 seems like a lot since I’ve always just dollar cost averaged into the market each month with my contributions. Makes me nervous to just buy with a lump sum. Am I overthinking it?
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Roll it over, 100%. You don’t incur a tax hit with a rollover so the DCAZ discussion doesn’t apply. You’re just moving the funds to a new location. Setup the rollover account with Fidelity, then do the rollover with TSP. It will take about a week. It’s much simpler to have everything in one brokerage. Roll it over and pick a fund. If he’s retired and drawing a pension, I’d avoid any lifecycle funds which are bond heavy. The pension takes the place of the bond allocation and is inflation indexed. I’m retired and am almost 100% in equities. VTI/VTSAX is a good choice.
Be aware of the legal protections TSP provides versus IRAs.
Spouse must consent to TSP withdrawals and TSP has better protection against legal judgement and creditors than IRAs. IRA protections are state specific.
Yes, you are over thinking it. If you sell today and buy tomorrow, it’s as if the sale never happened.
Just be aware that if he ever wants to do a backdoor Roth IRA having traditional TSP rolled into a traditional IRA will complicate matters.
I realize you said he is retired but in a military sub that could mean he is drawing mil pension but working second career or may go back to work later.
Also, if he has tax exempt traditional contributions from combat zone those should be rolled into Roth IRA to grow tax free which they dont do in TSP. (I just havent figured out how to make that rollover happen correctly but I need to soon)
Roll it over. If it is all traditional TSP and/or Roth TSP it is super easy to rollover to Rollover Ira and/or Roth. If you have tax exempt funds from combat zone in the traditional TSP it can be a little challenging if you want the tax exempt funds to remain tax exempt but it can still be done.
You shouldn’t worry about a lump sum rollover. If you are fully invested currently just invest it immediately into a similar type of fund.
When you know you want to do the rollover you may want to put all the TSP funds into the G fund while you are waiting for all the paperwork to go through but do it on a market up day. It is annoying if you don’t and the day the rollover goes through is on a down day so you end up with less than expected.
Ok thank you.