Page 100 - The Informed Fed--Hearn Wealth Management

CHAPTER ELEVEN

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According to the ICI, during 2015, 85% of newly opened traditional
IRAs were funded entirely through rollovers from qualified retirement

plans such as a 401(k) retirement plan and the traditional TSP. On the
other hand, only 15% of newly opened Roth IRAs were a result of
rollovers from a Roth 401(k) retirement plan or the Roth TSP. Since

2006, when transfers from 401(k) plans to Roth IRAs were first
permitted, only 6.9% of 401(k) retirement plan owners (including

traditional TSP owners) had made transfers into their Roth IRAs. Note
that a transfer from a traditional 401(k) or the traditional TSP to a Roth

owner must pay tax on the entire traditional retirement funds being
transferred.
Perhaps the one important reason that many traditional qualified

retirement plans and traditional TSP owners are not performing Roth
IRA transfers is because of the immediate tax liability. Also, the
foreg

employees are not contributing to the Roth TSP. However, the potential
tax-free distributions from the Roth TSP and from a Roth IRA

throughout retirement will, for most employees and annuitants, offset

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