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Six years ago, my dear sister decided to chuck it all, and leave fast paced southern California, and her high pressure job w/the Navy.

She and her family sort of "dropped out", which is all well and good, but I just found out that she left her 30k civil service retirement behind too!

She must've REALLY dropped out, because she used to be a pretty smart cookie. Anyway, when you leave civil service, you can pull your retirement money in a lump sum, but ONLY the money that was actually contributed. You are not entitled to any of the interest that accumulated while you were employed, nor does it accumulate any interest after you leave.

So for the last six years, she's had 30k just sitting, not earning a dime. When I found out, I urged her to take immediate action, and recommended that she roll it over into a Roth, using a mutual fund that has performed well as a vehicle. (I don't think she's in any shape to actively manage anything.)

Now, I'm not so sure that she CAN put it into a Roth. I vaguely recall some quirky thing about having to put it into a traditional IRA first, and then converting. Is this correct? And if so, wouldn't there be tax consequences when it's converted? The retirement contributions were after tax in the first place....can they be taxed again in this manner?

I'm calling her bi-weekly to follow up (nag) about this, and I don't want to misinform her.

Thanks,
Karen
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