Transferring funds from federal Thrift Savings Plan (401K equivalent) into Roth IRA should not be penalized since tax was paid, correct?

[sunrha]

Shouldn't converting a 401K transfer into a Roth IRA (after paying tax) be OK with no penalty?

[DavidD66 · Accepted solution]

If you rolled your Thrift Savings Plan into a Roth IRA, there will be no penalty, just the ordinary income tax on the amount transferred to and converted to a Roth IRA.

[dmertz]

If by "tax was paid" means that you had taxes withheld from the distribution, if  you did not substitute other funds to be able to roll over the entire gross amount of the distribution, in addition to being subject to ordinary income tax, the amount withheld for taxes and not rolled over is subject to an early-distribution penalty unless an exception applied.