The biggest disadvantage in converting TSP to Roth would be the immediate tax hit and the fact that it "could" put you in a higher tax bracket. Say for example if you have $100,000 and you convert it all at once, depending upon your bracket you will only transfer approx $80,000 assuming you are in the 20% bracket. You dont say where you are now living, but If you live in a state that has state income tax you must also figure that percentage into the equation which would further reduce the amout of money transfered into Roth.
If you dont convert, you would be required at age 70 1/2 to take the RMD and pay taxes on that amount every year for the rest of your life and your estate would pay taxes upon distribution.
If you convert to Roth after age 65 and have Medicare parts A and B....your part B premium will most likely increase for at least one year since the premium is based upon you MAGI from the year prior tax return and this would effect both people filing if it were a joint return.
The ideal situation is to convert as soon as possible for "time" is your friend. The positive aspects of converting is no RMD at age 70 1/2 and estate planning for your heirs.
If you convert to a Roth are you going to manage the money yourself or through a mutal fund??? Your TSP money has produced fairly good returns over the years with very very low costs, and little input required on your part. You need to consider if you can manage the Roth money as well as the returns your TSP money has provided you over the years. For some this is a very daunting task.
These are just some thoughts...Im sure there are other views and opinions. Good luck!
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