Rollover now or sit tight?

[skhoury]

Hello all,

I'm a bit torn on what I should do with my old TSP and my wife's old 403b/401a. We both just recently started new jobs. We both contributed to our old workplace plans. We nicely dollar cost averaged into the accounts for roughly 3 years or so and are both vested in 100% of the balance.

Now, we are at a cross roads. Do we rollover the funds now into an IRA or do we sit tight and see how the market behaves over the coming months (or possibly years)?

I guess my main fear is, if we roll over now, we risk buying into an IRA all in one shot, then the market (potentially) tanks and we lose a lot. Whereas now, we are dollar cost averaged in, so I feel like if the market tanks, it won't be as dramatic a loss. In other words, buying into a fund in the IRA at the top of the market (or at least it seems/feels that way).

CON to staying: I don't get any dividends in the TSP (but my wife's 403b/401a receives dividends).
PRO to staying: Perhaps I'll lose less during a market downturn?

Does that make any sense or am I way off the mark here? Please note, I'm not trying to time the market in anyway. I just honestly don't know when is the best time to rollover.

Should I rollover now or "later"?

Thanks for any feedback/advise you can provide!

[creditcardfree]

In my opinion, rollover now. You are invested for the long term. If your money is in stocks/mutual funds within your TSP and 403b accounts, that money is already fluctuating with the market, thus it is theoretically a transfer into the same types of accounts at the same price.

We are in the TSP, too. The fees are pretty low there, so it wouldn't be all bad to leave it if you like your investment options. The 403b accounts MAY have have fees, thus transferring the money will save you on fees over time.

Generally, you can make rollover requests by lump sums. If you have $20K invested, you could request two rollovers of $10K each if that would make you feel better. It's is too cumbersome with paperwork to make the request very frequently.

[bjl584]

I'd roll it over now. You will have many more investment options in a self directed IRA than in your old company's plan.

[skhoury]

Thanks for replying all. The downside to keeping the money in the TSP, while certainly cheap, is that I get no dividends. It just sits there and I rely on the market to provide capital appreciation.

As far as more options are concerned, I would really be moving it from one Target Date fund to another. I'm not big on handing picking funds/stocks, etc....I just keep it simple really.

Transferring over via multiple lump sums sounds like it would be a painful exercise in paperwork, etc. Has anyone around here ever done that before?

[Petunia 100]

Whether you invest via TSP, 403b, IRA, or taxable account, you are still invested. Therefore, there is no advantage to transferring assets when the market is up, down, or sideways.

The advantage to rolling to an IRA is to have control of both investment choices and costs.

I would never consider rolling the TSP money. The TSP has the very lowest cost structure possible as the costs are underwritten by taxpayers. The TSP offers index funds which are the best way to invest. There is no reason to exit the TSP.

The 403b I would roll yesterday. If that isn't possible, roll it today. Choose a custodian which will allow you to invest in low cost index funds or etfs.

Why would you want to receive dividends? Reinvest them. Don't sabotage your portfolio's growth.

[skhoury]

Whether you invest via TSP, 403b, IRA, or taxable account, you are still invested. Therefore, there is no advantage to transferring assets when the market is up, down, or sideways.

The advantage to rolling to an IRA is to have control of both investment choices and costs.

I would never consider rolling the TSP money. The TSP has the very lowest cost structure possible as the costs are underwritten by taxpayers. The TSP offers index funds which are the best way to invest. There is no reason to exit the TSP.

The 403b I would roll yesterday. If that isn't possible, roll it today. Choose a custodian which will allow you to invest in low cost index funds or etfs.

Why would you want to receive dividends? Reinvest them. Don't sabotage your portfolio's growth.

Hi Petunia - sorry, I didn't mean that I wanted to receive the dividends. I would definitely re-invested them. My point was that the TSP doesn't produce dividends in the first place, so that they could be re-invested, which is kind of a bummer.

[skhoury]

Whether you invest via TSP, 403b, IRA, or taxable account, you are still invested. Therefore, there is no advantage to transferring assets when the market is up, down, or sideways.

The advantage to rolling to an IRA is to have control of both investment choices and costs.

I would never consider rolling the TSP money. The TSP has the very lowest cost structure possible as the costs are underwritten by taxpayers. The TSP offers index funds which are the best way to invest. There is no reason to exit the TSP.

The 403b I would roll yesterday. If that isn't possible, roll it today. Choose a custodian which will allow you to invest in low cost index funds or etfs.

Why would you want to receive dividends? Reinvest them. Don't sabotage your portfolio's growth.

Hi Petunia - sorry, one more question. So you think it would be better to stay put in the TSP rather than rollover to a Vanguard account and index fund?

[Like2Plan]

Here is a recent article about TSP rollover that may be of interest to you

http://www.bloomberg.com/news/2014-08-12/brokers-lure-soldiers-out-of-low-fee-federal-retirement-plan.html

If I were in your shoes, I would hang onto the TSP as part is your overall diversification plan. TSP will accept Traditional IRA and 401k rollovers. The expenses are very low.

The conundrum you have over the dividends really is that TSP has a different way to account for the dividends--it is accounted for in the share price.

[Like2Plan]

Here's another reference for you:

Dividends and Capital Gains

Under the Internal Revenue Code, earnings in the TSP and other similar defined contributions plans (e.g., 401(k) plans) are not taxable income, nor is the tax treatment different for interest, dividends, capital gains, or tax-deferred contributions when money is withdrawn from the plan. Therefore, there is no need to report dividends and capital gains separately for tax-deferred accounts.
BlackRock Institutional Trust Company, N.A, which manages the index funds in which the F, C, S, and I Funds are invested, credits interest and dividend income each business day. This income is then reflected in the TSP share prices.
The daily change in TSP share prices reflects all investment income (interest on short-term investments, dividends, capital gains or losses, and securities lending income) net of TSP administrative expenses.

TSP Share Price Calculation

[Petunia 100]

Hi Petunia - sorry, one more question. So you think it would be better to stay put in the TSP rather than rollover to a Vanguard account and index fund?

I would. The TSP has index funds too and the cost is even lower than Vanguard's.

[skhoury]

Wow, boy am I glad I posted here before doing anything.

Thank you so much for the links and advise, Like2Plan and Petunia.

The bit about the dividends is incredible - I had no idea that it could be priced into the share price instead of a separate transaction. That really makes me feel better, like I'm not missing out on anything by staying in the TSP.

I will be hanging on to my TSP. At this point, either I consolidate my IRAs into the TSP (the reverse of what I was originally thinking!) or keep them as-is and leave the TSP on its own.

[creditcardfree]

Glad we could all help you out!