Page 102 - The Informed Fed--Hearn (edited 10.29.20)

70½. While the Roth TSP is subject to the RMD rules, a Roth TSP
participant is permitted to directly transfer all his/her Roth TSP account
to a Roth IRA. If the Roth TSP participant performs this transfer before
the year the participant becomes age 70½, then no RMD will be required
for the Roth TSP.
There are additional advantages to Roth IRAs. Individuals are
prohibited from contributing to a traditional IRA once they become age
70½, even if they are working past age 70 or if they have a spouse who
is younger than age 70 who is working and therefore has earned income.
Note that many federal annuitants work after they retire from federal
service or they have spouses who continue to work.
Contributions to a Roth IRA can be withdrawn, tax- and penalty-
free, at any time and for any reason. This is unlike traditional deductible
IRAs in which, prior to age 59½, withdrawals are subject to federal and
state income taxes and a 10% early withdrawal penalty.
Despite these advantages, only a small percentage of federal
employees are contributing to the Roth TSP and/or Roth IRA. Also,
those annuitants who transfer their traditional TSP to IRAs, transfer to
a traditional IRA rather than to a Roth IRA. In so doing, these annuitants
delay the payment of federal and state taxes until they withdraw the
transferred funds from their traditional IRAs, which they must do
starting at age 70½.
Many employees are averse to paying taxes on the “front end”
(Roth TSP) rather than on the “back end” (traditional TSP). They
do not realize the long-term benefits of the Roth TSP and Roth
IRA. These long-term benefits include:

• Value of tax-free income spread over an entire lifetime and
to a younger generation. As previously mentioned, Roth TSP
accounts can be directly transferred tax-free to a Roth IRA. Since
the Roth IRA is not subject to RMDs, an individual can use a
Roth IRA to accumulate tax-free investments over the
individual’s entire life. Upon the individual’s death, a non-

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