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|Thirft Savings Plans
Can I rollover my TSP to a Rollover IRA?
Yes. If you have left the federal government for at least 31 days, you
can have your TSP funds rolled over to a Rollover IRA.
Keep in mind that you need to first select a financial institution and
the investment that will receive your TSP account balance for a trustee-to-trustee
transfer. You must not receive any of your TSP funds to avoid income taxes.
If you do, the TSP office will be required to withhold taxes from your
What is TSP?
TSP stands for Thrift Savings Plan. The TSP is a retirement savings and
investment plan for workers who work for the U.S. Government. This plan
is similar to a 401(k) retirement plan used by the private sector.
Can I roll over part of my TSP?
Yes. You can rollover all or part of a single payment or, in some cases,
a series of monthly payments of your TSP to a Rollover IRA.
State and Local Government 457 Plans
Can I roll over my 457 Plan?
Yes. Starting in year 2002, under the new law you can move your money
from a Section 457 plan to an IRA.
However, just because the law allows it doesn't mean that this provision
will automatically be adopted by your plan. Check with your previous employer
to see if the plan has been updated to reflect the new law.
What if I left my job with the state or local government a long time
As long a you have a balance in your 457 plan you may be able to roll
it over into your new employers plan or into an IRA.
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What is a ROTH IRA?
A ROTH IRA is an individual retirement account established by individuals
that provides tax-free income after 5 years and age 59-1/2.
How much of my Rollover IRA can I convert to a ROTH IRA?
There is no limit on the amount that can be converted to a Roth IRA as
long as your modified adjusted gross income is below $100,000 per year.
I thought that the maximum amount that I could convert to a Roth IRA
was $2,000 per year.
Not so. Any amount can be converted to a Roth IRA if you meet the $100,000
per year income limit. However, only $3,000 in 2003
can be contributed to a Roth IRA subject to certain income limits.
Investors 50 years old or above may make an additional "catch-up"
contribution of $500, bringing their total to $3,500 for the year. Dont
confuse the unlimited amounts allowed for Roth IRA conversions with the
annual contribution limit.
What is a Roth IRA conversion?
If your income falls below a certain limit, you can convert any amount
in your Rollover or regular IRA to a Roth IRA. Caution: You must pay taxes
on any amounts converted from your Rollover or regular IRA to a ROTH IRA.
Does it make sense for me to convert my Rollover IRA to a Roth IRA
if I have to pay taxes on all my retirement funds?
Maybe. Your converted retirement funds in your Roth IRA will grow
tax free as opposed to growing on a tax-deferred basis. In essence,
you stop the tax clock by paying your taxes today on your retirement
funds for the benefit of withdrawing your money tax-free tomorrow.
Refer to our Roth IRA Conversion
calculator as a guide.
Who can convert their retirement funds to a Roth
Anyone can convert their retirement funds to a Rollover IRA and then to
a Roth IRA if they meet certain income limits. Your modified adjusted
gross income as a single or married filing jointly taxpayer must be $100,000
or less in order to convert to a Roth IRA. Also, you must be able to pay
the income tax you will owe on the converted amount from some other income
source. You cant use your Roth IRA funds to pay your conversion
What about couples, who file separately, can they convert a Rollover
IRA to a Roth IRA?
Yes. Couples who are married filing separately may convert their Rollover
or regular IRAs to a Roth IRA but only if they have been living separately
from their spouse for the entire taxable year and meet the $100,000 modified
adjusted gross income limit individually.
Can I move only certain IRAs to a Roth IRA?
No. You can convert several IRAs SEP, Simple IRA, regular IRA or
Rollover IRA to a Roth IRA as long as your modified adjusted gross
income is below $100,000
What if I convert my Rollover IRA to a ROTH IRA but later learn that
my modified adjusted gross income is greater than $100,000?
You can reverse your ROTH IRA conversion without taxes or penalties.
Can I convert my Rollover IRA to a Roth IRA a little at a time?
Yes. You can convert as much or as little as you like of your Rollover
or regular IRA to a Roth IRA each year as long as you meet the annual
income limit. Partial conversions will allow you to manage and better
plan for the taxes that you must pay on your converted amounts.
What are some advantages of converting my Rollover IRA to a Roth IRA?
You get to withdraw money from your Roth IRA tax-free after at least five
(5) years and if you are over age 59-1/2.
You will not be required to withdraw a minimum amount from your Roth
IRA after reaching age 70-1/2. Thus, your money can continue to grow tax-free
until you really need to access it.
Your beneficiaries can inherit your Roth IRA tax-free.
When must I start receiving distributions from my Roth IRA?
There is no requirement that you start receiving distributions from your
Roth IRA at a particular time. Withdrawals from your ROTH IRA will, however,
be tax-free only after five (5) years of opening your account and if you
are over age 59-1/2.
Ive started taking Required Minimum Distributions (RMD) out
of my IRAs. Can I still convert them to a Roth IRA even though I am over
Yes. Age is not a factor. Anyone can convert IRAs to a Roth IRA. You cannot,
however, convert your RMD payout. The balance of your IRA after you take
out your RMD can be converted to a Roth IRA. Caution: You will be taxed
on all funds withdrawn from your IRAs and converted to the Roth IRA.
What's the deadline for converting my IRAs to a Roth IRA?
A Roth IRA conversion can be done at any time before the end of the year.
Do not confuse the Roth IRA April 15 of the following year contribution
deadline with the December 31 Roth IRA conversion deadline.
Do I need to rollover my SEP or SIMPLE IRAs first to a Rollover IRA
before converting them to a Roth IRA?
No. Because SEP and SIMPLE IRAs are already IRAs, you can convert them
directly to a Roth IRA. However, for a Simple IRA, you must hold your
Simple IRA account for at least 2 years before converting it to a Roth
Can I use any of my Roth IRA funds to buy a house?
Yes. After your Roth IRA account has been opened for at last 5 years,
you can withdraw up to $10,000 (a lifetime maximum) without owing any
taxes or penalties on this withdrawal as long as the money is used for
your first time home purchase. You can also withdraw money from your Roth
IRA for your childrens first time home purchase.
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