I leave for basic on Aug. 12, and Im curious about what I should do with my 401K I have with the company I worked for. I have a few thousand dollars in the 401K plan and am not sure if I should transfer it to some sort of military savings plan or leave it there or what I should do with it. I plan on making a career out of the coast guard so if i can move it and continue putting money into it i will. Thanks for any advice.

Leave it where it's at especially if it's only a couple grand. More than likely you have more fund choices with the current brokerage than TSP will offer. Your other option is to roll it over into a traditional IRA at your bank or at one of the many online brokerages and continue to contribute thru a payroll deduction in addition to contributing to TSP. -Jeff

Something else to consider, if your employer has contributed to your 401k, is there a vesting timetable? If you remove or transfer funds you may loose out on the employers contribution. I'd just let it sit where it is, it ain't going anywhere. -Jeff

I would agree with rxjeff regarding keeping your contributions in your former employer's plan until you meet as much of their vesting requirements to also keep employer matching contributions, if they matched in your plan.

However I take exception to this view that any place other than TSP or anything other than TSP is better than TSP. The TSP may only have five individual investment funds and five lifecycle funds, but there is a method to the legislative madness that keeps the plan investing in broad bonds, US Stocks, and international stocks from established foreign stock markets. When the C, S and I funds are combined you have the ability to invest in almost 90% of what's out there in the world stock markets. But each of the funds tracks or replicates passively managed indexes, no picking and choosing to try to beat the markets, the intent is broad investment to provide returns that reflect the performance of the markets as a whole.

And then there's the G Fund, no other treasury investment like it other than the TSP.

Cost .015%; that's 15 cents per $1,000 balance. Average mutal fund expense (not including fees charged) .7% to .8% ($7.00 - $8.00 per $1,000 balance).

What are your goals with regard to this money from your former employer plan? If you want to keep it simple then after you enter the military and choose to sign up for TSP (and have an account with your first contribution made)you may at anytime transfer your 401(k) into your TSP account.

You could do this as soon as you are vesting in as much of your former employer's plan. Or you can take your 401(k) and go ahead and transfer it to another tax advantaged vehicle like a traditional IRA. If you choose to do this, check your administrative expeses and fees, they will eat away at whatever gains your access to "more investment options" than the TSP will offer you - may deliver.

And last if you transfer it to an traditional IRA and later want to transfer it into your TSP, you can do so at anytime, even years later after you've retired from the Coast Guard. You can transfer or roll over eligible tax-deferred or deductable accounts up until TSP cuts the last check to close out your account balance.

One other option, TSP and 401(k)s allow transfers into Roth IRAs; of course the amount transferred is taxable income earned in the year the transfer is made, but if you are willing to pay the taxes now and place it in a roth, that money can continue to accure earnings that are tax-free when withdrawn.

whatever you do check out your investment options, just becaus a plan may have a bunch to offer doesn't mean the whole lot are great or best for you and your investment goals. And check the administrative expense ratio and fees charged. Are you will to pay the going price to invest in that institutions particular funds?


Good luck and best wishes in your career with the Coast Guard.

Major, I did not mean to imply that TSP is a substandard investment vehicle by any means, especially with the much lower fees than traditional brokerages. For the original poster, I would offer this additional advice. While your young and just starting your military career I would sock away as much as you can now while the Gov't is picking up most of the tab for your housing,food and basic necessities. In a time in our economy when the market is down those shares you pick up now at a discount could be worth substantially more when you leave gov't service. I read on another thread here recently about the young seaman apprentice who went out and bought himself a 2009 Harley upon graduation from bootcamp(presumably with an enlistment or A school bonus), while that's a nice ride and may impress your friends back home or on base, that's hardly a wise investment! -Jeff

This message has been edited. Last edited by: rxjeff,

I also had a 401K, from my last employer, prior to joining the CG. I opted to do a Rollover into a IRA. You will have to first Rollover into a Traditional IRA, then convert into Roth IRA. The Traditional IRA is only opened to do the Rollover, and will later be closed, post Roth Conversion. Because 401Ks are pre-tax dollars and Roth IRA are post; you will have to pay the taxes on the converted amount. Believe me, it is worth it in the long run. You will be much richer, come retirement with a Roth than Traditional.

I went with USAA, but I regret doing so, since I am not loving the fund choices now. I would advise a Rollover with Vanguard, Fidelity, Schwab, or T.Rowe Price. Vanguard and T.Rowe Price are direct buy accounts (if purchasing their Mutual funds). Which means there are no transaction fees. Fidelity and Schwab and great discount brokers.

No disrespect for the TSP, but it is not the best thing out there. The TSP is good for those who would not otherwise invest or know how to.

If you need help with information on conversions to another investment house, please don't hesitate. Just like Social Security being meant for a retirement supplement, I believe military pension will not be able to carry most people through their old age.
Start contributing to an IRA now, and you will be set for life.

Aug 12, is just around the corner. You don't have to do anything now with your 401K. Make sure you do research prior to the money move. Again, we are here to help when you are ready.

This message has been edited. Last edited by: smirfy,

No harm no foul. No TSP is not the best thing out there, each individual needs to look at what's best for them, based on their goals and the features of what's available.

And as smirfy said for someone who doesn't know what to do, TSP at least lets you start doing something to save and supplement your retirement. If there's something better out there, then with time and knowlege, you'll find it and make your investment changes.

Smirfy, I don't know when you did your 401(k) transfer, but since 2008 (or whenever in this year each plan physically changed their process) the Pension Protection Act allows for plans like TSP and 401(k)'s to do a direct transfer - no more transfer to a traditional then conversion to a Roth - to a Roth IRA. Like in a traditional IRA transfer, no taxes are withheld; unlike the traditional IRA, the amount transferred is a taxable event, reported as taxable income earned in the year the transfer to the Roth is made.

TSP started doing the Roth transfers in Feb 2008, so I assume by now most of the other bigger equivalents have adapted their system (mainly tax reporting) to do the transfer directly to a Roth. The income requirement to do a Roth transfer is different than to open and make out of pocket contributions to the same.

Best wishes to all of you.

Yes, I converted in 1999 (Yes, I'm that old).
Good to hear the law has finally changed. I thought it was a bit foolish to go through process of changing money through one account, to get to another. However, as you pointed out, the taxes must still be paid for the Roth converted amount.

Now is this change only for the TSP, or can anyone Convert their 401K directly to a Roth at any Brokerage House?

P.S. Suze Orman is still reporting the old Roth law. Someone needs to send her the memo as well.

That portion of the PPA applied to all employer plans that do traditional IRA transfers. I don't know the drop dead date for plans to comply, but if the plan can offer the traditional IRA transfer, there's not much involved in also giving the Roth transfer instead.