Investing - Theory, News & General • Moving Tax-Exempt TSP Funds (Combat Zone Contributions) to Roth IRA

If you are a federal civilian employee and have left military service, it is even easier, and has been available for a long time (I executed in 2014).

You have the option to combine your military and civilian TSP accounts. Do so. The civilian TSP will not accept the tax free balance from the military account.

Then do a direct transfer of the remaining balance in the military TSP to a Roth IRA.

Thank you for the tip. I’m getting ready to start the process of moving the majority of my MIL & CIV TSP accounts to my Vanguard IRAs.

It sounds like doing this step first may simplify my process a little. I have a small amount of tax exempt in my MIL TSP account. If it goes like I imagine this would result in just one Traditional IRA transfer afterwards.

It would also result in two checks to me, one tax exempt, and one post tax that I would then send to Vanguard for deposit in my Roth IRA.

Is there an online way to initiate the combining of the accounts or will I need to call TSP?

Also by combining the accounts will that result in an automatic sending of the check for the tax exempt funds or will I request it?

1. Don’t take a check. Put your Vanguard account into the TSP system and do a trustee to trustee direct transfer. Done that way there is zero chance that you take too long and zero chance the IRS will have questions. Getting the tax free money in a Roth will save you taxes in the long run.

2. It doesn’t make the transfer easier or harder (you’ve already got two accounts), but it is a simple way to separate tax free money from tax deferred money. Then you can put the tax free money in a Roth without having a big tax bill.

3. I did it in 2015, so my recollection of the details is fuzzy. You can call Vanguard and/or the TSP. Transfer is a relatively common straightforward transaction.

Good luck.

Harry

Thanks Harry,

I already have the Vanguard info in the TSP system so the traditional TSP money will go directly to them. It’s been way over 7 days. I was talking about the tax exempt portion of the MIL account. Same deal with the civilian account. I have Roth funds there, and traditional. Once all traditional funds are combined they (assuming I combine the accounts in TSP) I meant one transfer to Vanguard.

I may not mess with combining the accounts though, must be done by mail in form. I may just do one at a time. MIL first, then CIV.

Once the traditional transfers to Vanguard I’ll continue with Roth conversions within Vanguard.

Thanks much

Statistics: Posted by dharrythomas — Sat Mar 09, 2024 7:16 pm — Replies 12 — Views 1732