TSP and Roth

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Q: I want to rollover as much of my TSP account as possible into my existing Roth IRA account when I retire in 2013.  I have NO NEED for my TSP account to supplement my income during retirement and want to leave as much of it as possible to heirs.
Problem:  Because the account may have as much as 700K in it at that time, the income tax due on a “one time” distribution of all or most of that amount would severely reduce the net value of the transfer.
Questions:
1.  Can I directly transfer all or any portion of the RMD to the Roth account?  I believe the answer to this question is “no.”  If not, please clarify.
2.  If the RMD cannot be deposited to the Roth, can I make other monthly deposits to the Roth from my TSP?  Am I limited in any manner (time, amount, frequency) regarding deposits to the Roth from TSP?  I believe I read somewhere that monthly withdrawals in excess of RMD from TSP were limited to only ten years.  This doesn’t make sense.
3.  At the this my estate planning goal is to transfer all or most of my TSP to the Roth over a 20 year period following my 71st birthday. Because of the income tax problem, my strategy is to do this by monthly withdrawals over a 20-year period.  I plan to make a substantial (100K) one-time transfer from the TSP to the Roth in the two years after I retire and then monthly deposits to the Roth in subsequent years.  The two years following my retirement will be lower-income years for me because I will be 68 and 69 in those years and am delaying drawing my Social Security until age 70.  My income will rise substantially after age 70 because of SS and RMD.

A: You can’t transfer your RMD to a Roth IRA account in order to circumvent the Roth IRA contribution limits. You may convert distributions from your TSP to your Roth IRA, subject to the IRS conversion rules. The TSP limits the way in which you may withdraw your money after you retire. You may initiate monthly distributions and change the amount of those distributions once per year. Depending upon how you withdraw your money, you may be subject to tax withholding. If  you’re not sure how to proceed, you should engage a CPA to guide you and to prepare your tax returns during the years in which you make the conversions.

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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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