Q. I am a FERS employee contributing to the Thrift Savings Plan. At the recommendation of a pre-retirement seminar, I am looking at a one-time in-service withdrawal of $100,000 into a Roth IRA. I realize that it will add $100,000 to income for 2012, but this is the year my husband’s business is losing money anyway. We intend to pay taxes now (presumably when they are lower, though my income will drop significantly when I retire) and not pay taxes on future earnings. Smart or dumb?
A. You shouldn’t make that move without a thorough analysis of the tax implications using pro-forma returns and consideration about what will be done with the money in the Roth IRA. This is a complex decision, and you should be careful to avoid taking “advice” from anyone with a conflict of interest in the matter. I’d stay put unless you make sure that it is in your best interests to make the move. The odds are that it will be a dumb move, but it’s possible that it could be an opportunity.