Transfer Tax-Exempt Pay for Serving in a Combat Zone Thrift Savings Plan (TSP) to a Self-Directed 401k (aka Roth Solo 401k)

Thrift Savings Plan (TPS) funds may be transferred to a self-directed solo 401k.  What is more, as long as the self-directed solo 401k plan allows for Roth solo 401k funds, contributions that were made to the Roth subaccount of TSP  from tax-exempt pay may be transferred to the Roth designated subaccount of the self-directed solo 401k.

Following is good language found on the the TSP site regarding the treatment of tax-exempt pay. https://www.tsp.gov/making-contributions/traditional-and-roth-contributions/

Contributing tax-exempt pay for serving in a combat zone (uniformed services only)

If you make Roth TSP contributions from tax-exempt pay, you never pay taxes on that money—not at the time you contribute it and not when you withdraw it. The earnings on those contributions are also tax-free if you meet the requirements for qualified Roth distributions. Note that tax-exempt contributions to Roth are subject to the IRS elective deferral limit.

If you make traditional TSP contributions from tax-exempt pay, those contributions will be kept separate from the rest of your traditional TSP money so that you won’t ever have to pay taxes on it. However, the earnings on those contributions will be taxed when you withdraw them, just like other traditional money.

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About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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