Rolling over into a TSP after distributions started

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Herekittykitty
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Rolling over into a TSP after distributions started

Post by Herekittykitty »

I have a regular TSP account from former federal employment. I have a current 457b from current state employment. I'm nearing RMD age so will have to start taking withdrawals from the TSP before long.

If I am still working at my current job (with a 457b) when I reach RMD age and have to start taking RMDs from the TSP, then once I retire will I be able to roll over any or all of the 457b into the TSP at that time even thought I'm taking RMD's from the TSP?
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Alan S.
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Re: Rolling over into a TSP after distributions started

Post by Alan S. »

Herekittykitty wrote: Sun Oct 24, 2021 5:12 pm I have a regular TSP account from former federal employment. I have a current 457b from current state employment. I'm nearing RMD age so will have to start taking withdrawals from the TSP before long.

If I am still working at my current job (with a 457b) when I reach RMD age and have to start taking RMDs from the TSP, then once I retire will I be able to roll over any or all of the 457b into the TSP at that time even thought I'm taking RMD's from the TSP?
Yes, the TSP will accept govt 457b rollovers for retirees as long as you still have a balance in the TSP. But if you are still working for the state then your 457b RMDs will not start until the year you retire.

However, if you roll your 457b into the TSP, because you will already be taking RMDs from the TSP, it will subject the former 457b balance to TSP RMDs as well. That is not good while you still have current state wages in your taxable income.

You could eliminate the TSP RMDs starting the year after doing a rollover to the 457b, and therefore have no RMDs for a time, but given that the 457b may have higher costs than the TSP, you would first have to determine how much more you would pay annually in expenses on the current TSP money. In case you still wanted to proceed with the rollover to stop the RMDs, you would still have to take the TSP RMD in the year you do the direct rollover, so your RMD reduction would not kick in until the following year. And of course, you also need to think about how long you will work for the state before retiring, as a rollover from the TSP may not be worth it if you are only going to eliminate 1 year of RMDs. It is not clear exactly when your TSP RMDs will begin (the year you will reach 72).

Main point is that if you roll the 457b to the TSP, it will increase your RMDs for the years you remain at the state employment.
Topic Author
Herekittykitty
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Re: Rolling over into a TSP after distributions started

Post by Herekittykitty »

Thank you so much for the information. I've read it and am going to read it some more. The TSP expenses are lower than the 457b expenses which is the main reason I will likely to do the rollover when I can.

I will be the age that requires me to start taking RMD's in about a year, so will have to start taking RMD's on the TSP in about a year since I am no longer employed by the federal government. I am still employed by the state government so won't have to take RMD's from the 457b for about a year assuming I leave state employment then.

My concern was that if I started taking the RMD's from the TSP whether that would mean I couldn't roll over 457b money into it once that happened - and you are clear that is not the case. That is a relief. That means that if I want to keep working for the state past the time I will have to start taking the RMD's from the TSP, I can do so and still roll over the 457b money into the TSP when I leave state employment and won't have to leave state employment sooner in order to have the option of rolling over the 457b money to the TSP if that is what I want to do.

Thank you very much again. I would not have been able to figure this out for myself.
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placeholder
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Re: Rolling over into a TSP after distributions started

Post by placeholder »

How bad is the 457 because it's possible that rolling a big piece of the TSP into it (if it takes rollovers) might end up lower cost due to reduced taxes until you finally retire then roll it all back to the TSP.
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Herekittykitty
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Re: Rolling over into a TSP after distributions started

Post by Herekittykitty »

placeholder wrote: Mon Oct 25, 2021 7:06 pm How bad is the 457 because it's possible that rolling a big piece of the TSP into it (if it takes rollovers) might end up lower cost due to reduced taxes until you finally retire then roll it all back to the TSP.
The 457 isn't bad but the TSP is better. The amount in the TSP is less than 10% of the amount in the 457. I see what you mean about taxes, but since the amount in the TSP isn't very high and it is making more money for me per dollar than the 457, and since I want to keep things as simple as possible, I think I'll leave the TSP intact. But thank you very much for the suggestion, because I wouldn't have thought of it that way otherwise and it does give me a different way of looking at it.
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placeholder
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Re: Rolling over into a TSP after distributions started

Post by placeholder »

You have to look at the net so how much will you lose in early taxes because of rmds while employed versus the difference in expenses in the accounts?
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Herekittykitty
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Re: Rolling over into a TSP after distributions started

Post by Herekittykitty »

placeholder wrote: Tue Oct 26, 2021 7:10 pm You have to look at the net so how much will you lose in early taxes because of rmds while employed versus the difference in expenses in the accounts?
Good point.
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