Q. I am 36 years old and make about $125,000 a year and file as single head of household. I have a $300,000 in a traditional TSP and about $50,000 in the Roth TSP. However, starting this year I will be making more than the $117,000 limit to invest in my private Roth IRA. I like the idea of Roth because I live in Nevada, which has no state income tax, and federally I am in the 25 percent tax bracket. In retirement I plan to leave Nevada to go to a state that has a 6 percent state income tax, while still planning on being in the federal 25 percent tax bracket (of course, it’s impossible to predict future tax brackets). I think I will be paying more taxes in the future, due to federal and state taxes, than I do now. So I would like to do TSP Roth for $18,000 but still invest in my private Roth for $5,500 because it does much better than the TSP rate of return. Can I do a back-door private Roth without it affecting taxing my traditional TSP? I heard when doing the back-door option, the IRS values all IRAs, and I wasn’t sure if my traditional TSP would be affected for taxation, which I do not want to happen.
A. I can’t give personal tax advice through this forum. You’ll need to engage a CPA for that and you should seek personal advice before proceeding with your plan, since there are complications that could arise. I can tell you, however, that, in general, the IRA aggregation rules for conversions do not include the TSP. The TSP is not an IRA.
