7 Years Out - Fear of the Unknown

[evilanne]

Just need to figure out medicare, IRMAA, and RMDs down the road.

Also, just saw this video on long term capital taxes that may present an interesting strategy to Roth conversions. Still mulling this one over. Interesting approach.
https://www.youtube.com/watch?v=HzecukpTnOo

Best to all. Love this forum! great advice.

Good Luck with your strategy...it is much more difficult once you are retired with all the different thresholds you have to watch for. I think it is easier for married couples with larger tax brackets/thresholds. Just realized with doing conversions, I need to keep AGI under $200K to avoid NIIT of 3.8% on investment income or pay additional $38/$1000 on investments. With my current plans I don't see anyway to avoid IRMAA for Medicare part B other than opting out and just relying on FEHB.

Interesting video but I have not been in the 0% capital gains category in the past 30 years, even after retiring and before taking LE payments from TSP. It might be somewhat easier for married couples, assuming they have built up a brokerage account rather than putting most/all of their retirement in traditional TSP/401K/IRAs.
At 8:26 in video, there is a chart with note at bottom

Exceptions if wealth is concentrated in tax-deferred accounts:
1) Roth 401K contributions in peak earning years
2) Proactive Roth conversions in lower income years

I think many here will fall in this category. Roth TSP has only been around since 2012 and only about 8% of all funds are in TSP Roth. Per AI:

Key Trends in Roth TSP Usage
The FRTIB's demographic reports outline several distinct behaviors regarding how federal employees utilize the Roth option:
Overall Assets: Out of more than $1.15 trillion in total TSP assets, approximately $91 billion is held in Roth accounts. The vast majority remains in traditional pre-tax balances due to the decades-long head start traditional accounts had before the Roth option launched in 2012. [1, 2, 3]
Income-Based Popularity: Annual participant reports reveal that the popularity of the Roth TSP increases with an employee's income. While this contradicts strict tax logic (as higher earners usually benefit more from immediate pre-tax deductions), higher-paid federal workers choose the Roth option at a much higher frequency than lower-paid employees. [1]
In-Plan Conversions: Since the TSP launched a Roth in-plan conversion feature in early 2026, roughly 30,000 participants have actively converted portions of their existing pre-tax traditional balances into Roth status. [1, 2]

[DCCyclone]

Thanks to evilanne for that, and regarding income-based popularity of Roth, it's obvious to me the strict tax logic is, for lower-income feds, more than offset by current everyday cash flow logic. Pre-tax traditional lets the employee keep more $ up front, and lower-income feds need that $ for regular bills more than higher-income feds.