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Old 05-14-2014, 11:57 PM
 
1,425 posts, read 3,066,065 times
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Can someone advise me on how best to invest my Thrift Savings Plan, I want to roll over into a tax free Roth IRA but I am not sure that this is the best thing. I would like to invest like everyone else, high returns, low fees/taxes, etc. but not sure what is the best way to go. I want to be able to take my money out as needed w/o penalty, w/o delays, w/o a lot of taxation and fees or penalties. In short, what is the best way to invest my TSP. I want low risk, low tax, low fees, no penalties, high gains, easy access. Is there such an animal? Please help!
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Old 05-15-2014, 12:22 AM
 
738 posts, read 1,575,861 times
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Are you already retired from the federal government?
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Old 05-15-2014, 06:53 AM
 
Location: Skokiewood
732 posts, read 2,769,962 times
Reputation: 657
Quote:
Originally Posted by Cookiemeister View Post
Can someone advise me on how best to invest my Thrift Savings Plan, I want to roll over into a tax free Roth IRA but I am not sure that this is the best thing. I would like to invest like everyone else, high returns, low fees/taxes, etc. but not sure what is the best way to go. I want to be able to take my money out as needed w/o penalty, w/o delays, w/o a lot of taxation and fees or penalties. In short, what is the best way to invest my TSP. I want low risk, low tax, low fees, no penalties, high gains, easy access. Is there such an animal? Please help!
These things are not compatible. High returns carry high risk.

Also, given your laundry list of requirements, I'm not sure you understand how retirement savings work. Generally, you can't take the money out of any tax deferred retirement account without some tax consequences.

- If you make a withdrawal before age 59 1/2, you pay a 10% penalty tax, whether the money comes out of a tax-deferred or Roth account.
- If you make a withdrawal after age 59 1/2, there's no penalty tax but the income is still subject to regular income tax (if not from a Roth account).
- If you convert a tax deferred account to a Roth account, the conversion is subject to immediate taxation.
- Once you convert a tax deferred account to a Roth account, you can't withdraw the funds for five years.

Of course, if you want the absolute lowest investment fees available (other than a bank IRA CD), you should leave the money in the TSP. Vanguard's fees, which are typically the lowest available to the general public, are still about 10 times higher than those of the TSP.

In short, go see a financial planner.
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Old 05-15-2014, 06:56 AM
 
21,451 posts, read 15,607,192 times
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Quote:
Originally Posted by Thepreacherswife View Post
These things are not compatible. High returns carry high risk.

Also, given your laundry list of requirements, I'm not sure you understand how retirement savings work. Generally, you can't take the money out of any tax deferred retirement account without some tax consequences.

- If you make a withdrawal before age 59 1/2, you pay a 10% penalty tax, whether the money comes out of a tax-deferred or Roth account.
- If you make a withdrawal after age 59 1/2, there's no penalty tax but the income is still subject to regular income tax (if not from a Roth account).
- If you convert a tax deferred account to a Roth account, the conversion is subject to immediate taxation.
- Once you convert a tax deferred account to a Roth account, you can't withdraw the funds for five years.

Of course, if you want the absolute lowest investment fees available (other than a bank IRA CD), you should leave the money in the TSP. Vanguard's fees, which are typically the lowest available to the general public, are still about 10 times higher than those of the TSP.

In short, go see a financial planner.


You can take contributions out of a Roth at any time with no tax issues. It's only the earnings in a Roth that are subject to tax penalties
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Old 05-15-2014, 12:09 PM
 
Location: Skokiewood
732 posts, read 2,769,962 times
Reputation: 657
Quote:
Originally Posted by Lowexpectations View Post
You can take contributions out of a Roth at any time with no tax issues. It's only the earnings in a Roth that are subject to tax penalties
Yes, thanks for clarifying that. Technically, a withdrawal is a non-qualified distribution and subject to the 10% early distribution penalty if it happens with five years of the establishment of your first Roth account, but under the ordering rules for non-qualified distributions a withdrawal is deemed to come first from regular contributions.

And just to further clarify, your statement does not apply to conversions. Those are subject to a separate 5-year waiting period before withdrawal.
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