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Does money in a 457 count against modified AGI when rolled into a Roth account?

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  • Does money in a 457 count against modified AGI when rolled into a Roth account?

    I am graduating from residency at the end of this month (June 2020) and starting a new job at the VA. My current employer is a state institution and I'll have about $18,000 in a governmental 457. I'd like to roll this money out of the 457 and I see three options:

    1. Roll into Roth IRA
    2. Roll into TSP as Roth contribution
    3. Roll into TSP as traditional, pre-tax contribution

    I'd prefer option 1 or maybe option 2 but I'm not sure of the effect on my MAGI. I file taxes as married filing jointly, and I estimate our total income this year will be about $184,000 between my wife and me. I've already maxed out my Roth IRA and a spousal Roth IRA this year. I know if I roll my 457 into a Roth account, I'll have to pay incvome taxes on that money, but I'm wondering if the money from the 457 would then also count against my MAGI, which would put me over the $193,000 threshold for contributing the max to a Roth IRA. If that's the case, then I'll probably just roll it into a traditional TSP.

    To summarize, does the money in a 457 count against MAGI if rolling into a Roth IRA or Roth TSP? Thanks!

  • #2
    Yes, assuming the money is currently pre tax, not Roth

    I’m not a TSP expert but I think option 2 is likely not possible

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    • #3
      jacoavlu is correct, you can not do option 2.

      A taxable rollover can only be made to a 401k, 403b or 457b that supports an in-plan Roth rollover (IRR).

      The TSP does not support IRRs.

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      • #4
        Thanks for the responses. I only briefly looked at the TSP and it looks like you can do Roth contributions, but I didn't realize you can't do a rollover from a pre-tax account to a Roth TSP.

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        • #5
          The lack of an in-plan Roth Rollover (IRR) feature in the TSP has disappointed many people for many years.

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          • #6
            TSP is still an excellent plan to use. Excellent low cost funds and uniquely TSP will accept a rollover even if you are no longer an active participant - as long as you have a balance.

            so it is commonly recommended to keep funds in TSP even if when you move on to a new employer with a new plan

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            • #7
              Originally posted by jacoavlu View Post
              uniquely TSP will accept a rollover even if you are no longer an active participant
              solo 401k accepts rollovers even if you are no longer self employed, correct?

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              • #8
                Originally posted by CFEonline View Post

                solo 401k accepts rollovers even if you are no longer self employed, correct?
                yes except vanguard

                though it could be said “no longer self employed” is not really a thing. I get what you mean though, yes a solo 401k could accept a rollover even in a future scenario where you no longer have ongoing self employment income

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