One-time rollover from TSP into Roth IRA


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.


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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 and view his blog at


  1. You do need to make a careful decision about this. Your first priority is to contribute that 5% to your TSP to get those matching funds. As for a Roth IRA, there are some benefits for you if you plan to stay with it for about five or more years and continue to add money to your Roth IRA each year. For example, most Roth IRAs have a minimum guaranteed return, many have bonuses of three percent plus for up to five or seven years, your earnings are locked in and never lost, you are not subject to a required minimum withdrawal at age 70 1/2, you will enjoy permanent tax free earnings, income you can’t outline, and more. If you are looking for a safe and comfortable retirement, a Roth IRA might be the way to go. However, it’s really up to you. Since I don’t know the specifics of your situation, there is no way to say yea or nay to your question. I have no ax to grind that favors a Roth IRA over any other investment. My purpose is just to provide you with a little food for thought.

  2. This may likely be a dumb move. Is the person who suggested the $100K TSP withdrawal > Roth IRA getting your business? Will you be investing in low cost index funds or high expense ratio managed funds with A, B, or C shares?

    Why not move the money into a traditional IRA and convert small chunks (say $20k yearly) in a Roth IRA?

    The in-service withdrawal strikes me as a huge red flag.

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