Episode Details
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The Roth Conversion Mistake That Costs Federal Employees a 10% Penalty
Description
Roth conversions can be powerful — but do one before 59½, or inside your TSP, without a plan, and it can sting. Charles and Marcus explain why these two are mentioned in the same breath: the 10% early-withdrawal penalty when you withhold tax under 59½, why an in-plan TSP conversion avoids the penalty but won't withhold your taxes, and why you need cash outside the account to pay the bill. Walked through with two real stories — "Jack" and "Jill" — plus the measured-step approach and the Roth 5-year clock.
Chapters:
0:00 Before 59½ or Inside the TSP
1:30 The 10% Penalty
2:20 Inside the TSP: No Withholding
3:47 Why a "Distribution"
5:46 Jack's Story
8:35 Jill's Story
13:30 Start Small
14:56 Ask About the 5-Year Clock
Watch Roth Conversion Timing Mistakes Some Federal Employees Make with Tax Brackets: https://youtu.be/Ql-ZHqbEtm0
CTA: Apply for a Retirement Consultation: https://apply.cdfinancial.org/6a694299bad1c9a176cdc79f/
Disclaimer: Educational only; not tax advice. Consult a qualified tax professional before a Roth conversion. Advisory services through CD Financial LLC dba CD Financial (CA); insurance through CD Financial & Insurance Services LLC.