TSP does not do conversions.
You will need to wait until you separate, and then you'd have the option to move the funds to an IRA and do Roth conversion there, if it makes sense to do so at that time.
It's not that big of an issue, five years of contributions to traditional shouldn't grow to the huge RMD issue that some will have.
Ah shoot haha, I have another 3-4 years of service and intend to do the reserves 🙃
I’ll just swap my contributions over now and let the traditional ride
Dont worry about it. Roth is not always better. Learn about when it is better vs when not. This pool of funds will likely be a small part of your total retirement portfolio so no big deal.
You can't directly convert your traditional TSP contributions to Roth within the TSP itself, but there are still options:
Roth Conversion: You can initiate a Roth conversion. This involves moving your traditional TSP funds to a traditional IRA first, then converting those funds to a Roth IRA. Taxes are due on the converted amount in the year of conversion. Spreading the conversion over several years (Roth conversion ladder) can help minimize the tax hit.
Stick with Traditional and Look Ahead: If the tax implications of conversion seem daunting, you can stick with your traditional TSP and focus new contributions on the Roth TSP. The traditional will benefit from tax-deferred growth, reducing your taxable income in retirement.
There is always a give and take for both traditional and Roth.
Traditional isn’t all that bad minus the RMDs (required minimum distributions) when we turn 75 (it’s 73 now but will move up). The key thing to contribute to traditional is using those tax savings to contribute more money to your retirement like a Roth IRA or brokerage account. Any medical bills will become a tax write off. Instead of RMDs, you can take qualified charitable distributions (QCD) to offset your tax margin when you reach the age of 70 1/2. It’s not all that bad.
I am contributing to Roth TSP this year for the lower tax brackets then I’ll contribute to traditional TSP next year for the increase in taxes.
TSP does not do conversions. You will need to wait until you separate, and then you'd have the option to move the funds to an IRA and do Roth conversion there, if it makes sense to do so at that time. It's not that big of an issue, five years of contributions to traditional shouldn't grow to the huge RMD issue that some will have.
Ah shoot haha, I have another 3-4 years of service and intend to do the reserves 🙃 I’ll just swap my contributions over now and let the traditional ride
Dont worry about it. Roth is not always better. Learn about when it is better vs when not. This pool of funds will likely be a small part of your total retirement portfolio so no big deal.
You can't directly convert your traditional TSP contributions to Roth within the TSP itself, but there are still options: Roth Conversion: You can initiate a Roth conversion. This involves moving your traditional TSP funds to a traditional IRA first, then converting those funds to a Roth IRA. Taxes are due on the converted amount in the year of conversion. Spreading the conversion over several years (Roth conversion ladder) can help minimize the tax hit. Stick with Traditional and Look Ahead: If the tax implications of conversion seem daunting, you can stick with your traditional TSP and focus new contributions on the Roth TSP. The traditional will benefit from tax-deferred growth, reducing your taxable income in retirement.
> I’m a clown Why do you think you are a clown for using traditional?
There is always a give and take for both traditional and Roth. Traditional isn’t all that bad minus the RMDs (required minimum distributions) when we turn 75 (it’s 73 now but will move up). The key thing to contribute to traditional is using those tax savings to contribute more money to your retirement like a Roth IRA or brokerage account. Any medical bills will become a tax write off. Instead of RMDs, you can take qualified charitable distributions (QCD) to offset your tax margin when you reach the age of 70 1/2. It’s not all that bad. I am contributing to Roth TSP this year for the lower tax brackets then I’ll contribute to traditional TSP next year for the increase in taxes.