Q. Effective Feb. 29, 2012, I am a CSRS retiree from federal service; I participated in both the Thrift Savings Program ($201,000), and the Voluntary Contributions Program. I must make an election soon of the funds now in the VCP: $87,637 (nontaxable); $34,682 (taxable).
I am married, and I will be 66 years old in October. I (we) do not foresee needing the money from these two sources in the near term. I will likely convert everything to a traditional IRA then Roth IRA in April of the year after I turn 70½, to be left to my son after I die. He is now 23.
Inasmuch as I have all TSP funds in the G Fund, I would like to know if it is prudent/savvy/advisable to place the taxable VCP portion in the TSP G Fund and then deposit the nontaxable portion into a traditional IRA at my federal credit union.
A. I can’t responsibly tell you how to invest the money without knowing a lot more about you, your goals and your circumstances. I can recommend, however, that you roll the pretax money into your TSP account and the post-tax money into a Roth IRA at a discount broker. You may then take advantage of the unique opportunities in the TSP and emulate some of those opportunities in the Roth IRA by using exchange-traded index funds that are similar to those offered in the TSP. For example, the following iShares funds are comparable to four of the TSP’s basic funds: IVV for the C Fund, IWM for the S Fund, EFA for the I Fund and AGG for the F Fund. Unfortunately, there is no equivalent for the G Fund and money market or bank savings will be about the best you can do.