Q. I am thinking about starting to put my TSP contributions into the new Roth TSP. I already have an adequate amount in the regular TSP, and I am thinking the amount going into the Roth will go to my kids after my wife and I are gone. I understand the inherited Roth TSP will be tax-free to them — is that right?
I am disappointed I cannot transfer my Roth IRAs into the new Roth TSP — why is that?
A. This is basically correct, if you’re talking about federal income tax. There are rules that must be obeyed, however, and circumstances under which taxes may have to be paid on earnings, anyway. All in all, I don’t find this a compelling reason to forgo the tax savings now so that it will be avoided later, unless you know that the tax rate on the other end will be significantly higher than it is today. There is no inherent advantage to paying taxes now so they won’t have to be paid later. It all depends upon the tax rates.
I agree that it would be nice to be able to move an existing Roth IRA balance into the TSP, and I can’t tell you why they imposed that restriction.