Max out TSP, but make too much for Roth IRAs. How else do we save for retirement?

[Anonymous]

What about the Roth TSP option? You should switch some of your contributions that way.

[Anonymous]

I know this may be a stupid question and a bit of tangent, but here goes.

If you are a fed and you are maxing out your TSP, why do you need any additional retirement? It seems to me that you are going to get 25%-30% of your highest income every year to begin with in pension. Then you'll havea maxed out TSP. Will I really need more than that? Shouldn't the pension count for soemthing in the retirement savings analysis?

TIA

[Anonymous]

Anonymous wrote:We max a traditional IRA each year, even though we get no tax break. The money grows tax free, and it's another disciplined savings vehicle. Worth it instead of socking another $11K into taxable investments for us.

Yes. I do that plus put another $10-20k in my regular investment accounts. Every time we've done the math w/ our accountant on Roth conversion the answer's been not worth doing (we are in our 50s), if you're younger the answer may differ.

[Anonymous]

Anonymous wrote:I know this may be a stupid question and a bit of tangent, but here goes.

If you are a fed and you are maxing out your TSP, why do you need any additional retirement? It seems to me that you are going to get 25%-30% of your highest income every year to begin with in pension. Then you'll havea maxed out TSP. Will I really need more than that? Shouldn't the pension count for soemthing in the retirement savings analysis?

TIA

Do the math and you'll see this can leave a huge shortfall, that strategy will never work IMO for many people. I've maxed out my TSP for 26 yrs. and done reasonably well with it (high six figure balance)... using traditional prudent withdrawal rates from the TSP + the FERS annuity + Social Security, I will get only about 2/3 of my current salary.

That is insufficient by most retirement standards, IMO you need at least 75-80% especially if you don't plan on moving to a low cost place to live. That's why I've put an extra $10-20k/yr in a traditional IRA and taxable investments every year for 25 yrs. With that we will have 80-85% of my salary and a more than adequate cushion, in fact I may even have 90-105% of my current salary in retirement thanks to this strategy.

Relying on just a FERS annuity + TSP + Social Security is very risky IMO.

[Anonymous]

I would like to do a back door Roth IRA.

I am a retired fed with a TSP account.

I also have a traditional IRA that I took tax deductions on over the last 20 yrs...over 100k.

I am working and have a 401k with my new employer that I am maxing out.

I would like to do a backdoor Roth IRA but I would put $6k in Backdoor IRA but because I have 100k in my IRA i would have to pay taxes on about 95%.

My question is can I roll my IRA into the TSP then do a backdoor Roth IRA without having to pay taxes on the rollover.

Thanks...

[Anonymous]

Anonymous wrote:I would like to do a back door Roth IRA.

I am a retired fed with a TSP account.

I also have a traditional IRA that I took tax deductions on over the last 20 yrs...over 100k.

I am working and have a 401k with my new employer that I am maxing out.

I would like to do a backdoor Roth IRA but I would put $6k in Backdoor IRA but because I have 100k in my IRA i would have to pay taxes on about 95%.

My question is can I roll my IRA into the TSP then do a backdoor Roth IRA without having to pay taxes on the rollover.

Thanks...

I do not know the answer to you question, but I thought you should at least be aware of this recent change in tax rules regarding multiple roll overs in the same year.

http://www.marketwatch.com/story/how-to-beat-new-ira-rollover-rules-2014-02-18

[Anonymous]

Anonymous wrote:

Anonymous wrote:I know this may be a stupid question and a bit of tangent, but here goes.

If you are a fed and you are maxing out your TSP, why do you need any additional retirement? It seems to me that you are going to get 25%-30% of your highest income every year to begin with in pension. Then you'll havea maxed out TSP. Will I really need more than that? Shouldn't the pension count for soemthing in the retirement savings analysis?

TIA

Do the math and you'll see this can leave a huge shortfall, that strategy will never work IMO for many people. I've maxed out my TSP for 26 yrs. and done reasonably well with it (high six figure balance)... using traditional prudent withdrawal rates from the TSP + the FERS annuity + Social Security, I will get only about 2/3 of my current salary.

That is insufficient by most retirement standards, IMO you need at least 75-80% especially if you don't plan on moving to a low cost place to live. That's why I've put an extra $10-20k/yr in a traditional IRA and taxable investments every year for 25 yrs. With that we will have 80-85% of my salary and a more than adequate cushion, in fact I may even have 90-105% of my current salary in retirement thanks to this strategy.

Relying on just a FERS annuity + TSP + Social Security is very risky IMO.

Why would you need more than that? What bills do you anticipate in retirement? I wont have a mortgage or childcare expenses. I'm 30, a Fed, and don't live on 100% of my income today. I feel like my TSP and pension should be sufficient.

[Anonymous]

I feel like with my house paid off, I could probably scrape by on my pension and SS-- which would probably be about half my current salary. I think I could probably withdraw about another half of my current salary from my TSP each year as well.

[Anonymous]

1. Nondeductible IRA (max out)

2. Invest in low cost mutual funds (eg Vanguard), not necessarily index funds but could be.

That + TSP + other outside savings/invesment = retired at 58 for me.

Converting non-Roth IRAs to Roths may or may not be the way to go, you must do some research and tailor that decision to your circumstances including available cash to pay tax due on conversion, etc.

In my case, funds received from family trust and parents' inheritance meant no advantage to a Roth conversion based on best available info. YMMV.

[Anonymous]

Anonymous wrote:I know this may be a stupid question and a bit of tangent, but here goes.

If you are a fed and you are maxing out your TSP, why do you need any additional retirement? It seems to me that you are going to get 25%-30% of your highest income every year to begin with in pension. Then you'll havea maxed out TSP. Will I really need more than that? Shouldn't the pension count for soemthing in the retirement savings analysis?

TIA

Of course pension counts for something but FERS + SS will not be enough for me or most I know.

I've been saving 7-10% of gross salary IN ADDITION to maxing TSP contribs + catchup contribs + nondeductible IRA for the past 20 yrs+.

What's your TSP done? I know people who lost a shitload in '07-08, others were more conservative at getting out of equities mostly (not fully) and saw less than half of the losses of those who were fully invested. Those who went 100% G Fund are getting killed by low interest rates.

Those who diversified well have averaged well over 7-10% for the past 5 yrs on top of much lower losses in '07-08. In real dollars this can mean hundreds of thousands of $ difference in the balance of your TSP account, so there is no one answer for "will you need more than TSP?" In part it depends on where your TSP account is... drawing down on $750k+ is a lot different than drawing down on $400k ...

[Anonymous]

Anonymous wrote:I would like to do a back door Roth IRA.

I am a retired fed with a TSP account.

I also have a traditional IRA that I took tax deductions on over the last 20 yrs...over 100k.

I am working and have a 401k with my new employer that I am maxing out.

I would like to do a backdoor Roth IRA but I would put $6k in Backdoor IRA but because I have 100k in my IRA i would have to pay taxes on about 95%.

My question is can I roll my IRA into the TSP then do a backdoor Roth IRA without having to pay taxes on the rollover.

Thanks...

I did this last year. You need to fill out form TSP-60 to request direct transfer of your traditional IRA into your TSP. You can do as direct transfer (from your IRA financial institution directly do TSP) rather than rollover (where they send the money to you and you forward it). I recommend transfer rather than rollover - minimizes the chance of something going wrong and it getting treated as a distribution.

Caveat that I am not retired, but I believe the TSP will still allow transfers/ rollovers in during retirement.

https://www.tsp.gov/forms/transfersAndRollovers.shtml