No. of Recommendations: 2
On the subject of too much consolidation, sure all of us fear the day that some major financial institution goes under or is disrupted by a super major event like say a major earthquake or tsunami. Then having all your funds in a single account could be a problem. Eventually they will get it sorted out, but in the meanwhile what happens if you need funds to live on. So having several accounts can be a plus. But if you have other assets in IRAs or Roths, I wouldn't worry about it too much. In addition the TSP may not have federal guarantees, but at least it has lots of watchdogs. I would expect it to be one of the safest.

On 401K to TSP, most people like the freedom they get with a rollover to an IRA to select their own custodian which gives you a broad selection of investments and services. Going to TSP due to low fees could be reason enough, but are you completely satisfied with TSP in all aspects? If not, IRA might be a better choice due to flexibility to deal with unforeseen future situations.

On Roth conversion, the usual consideration is income taxes to be paid on the IRA (when you take distributions in retirement) or on the conversion. If conversion puts you into a high tax bracket it may be best to consider when if ever you might have a low income/low tax rate year. If you are in the 15% bracket or lower, by all means do the (partial?) conversion now to use up any unused 15% bracket. I doubt you will ever pay less than that. In the 25% bracket or higher, I would hesitate. It depends on what your income will be in retirement and what bracket you expect to be in. If higher than now, by all means convert. But a year of unemployment for example is a great opportunity to convert. The best you can do I think is gaze into you crystal ball, try to anticipate future events and your income levels in retirement, and from there pick the best tax situation you can find to pay those taxes.

Of course you can always wait to mandatory distributions at age 70-1/2, but would that be a major tax event for you? If yes, plan ahead. If no, there is no hurry. Perhaps Congress will change the law and create new opportunities. Or do you think tax rates will have to rise?
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