TSP Roth In-Plan Conversions Are Live: Should You Be Excited?
Last reviewed: September 2026 · Educational, not individual advice
Since January 28, 2026, you can convert traditional TSP money to Roth inside the plan: $500 minimum, up to 26 times a year, with the tax paid from outside the TSP because the plan withholds nothing. It pays off most in a low-income window, often between the FERS supplement ending at 62 and Social Security or required distributions beginning.
Like most 401(k) plans, the TSP now offers in-plan Roth conversions. Whether that deserves excitement depends on your tax bracket this year versus later, where the tax money comes from, and what the conversion does to Medicare premiums and your heirs. This guide covers the rules, who benefits, and when converting is a mistake. We use a hypothetical composite couple, Sam and Dan, to keep it concrete; they are not clients.
What is a TSP Roth in-plan conversion?
You have pre-tax money in your traditional TSP balance. A Roth in-plan conversion moves some or all of it to your Roth TSP balance. If you have contributed to Roth TSP before, the conversion shifts money between the two balances. If not, your first conversion creates the Roth balance. The money never leaves the TSP, and your investments do not change; only the tax character does.
How is a TSP Roth conversion taxed, and who pays it?
- The converted amount is taxable income in the year of conversion, federal and Maryland (state plus county). It cannot be reversed.
- The TSP withholds no tax. You must pay the tax from personal funds, not from the TSP balance, and you cannot use part of the conversion to cover it. That usually means quarterly estimated payments, due April 15, June 15, September 15, and January 15.
- Each conversion starts its own five-year clock for penalty-free withdrawal of the converted amount if you are under 59½. Earnings are tax-free once you are 59½ and your Roth TSP has been open five years.
Illustrative example: Sam converts $60,000 in a year when the couple sits in the 22% bracket. Federal tax is about $13,200 ($14,400 if the conversion spills into the 24% bracket), plus Maryland at 5.75% and Montgomery County at 3.2%, about $5,370. The couple needs roughly $18,500 to $19,800 in a savings account, sent in as estimated payments, or the conversion turns into an April surprise with an underpayment penalty on top. Maryland's pension exclusion for taxpayers 65 and older does not cover TSP withdrawals or conversions, so the state side is the same at 63 or at 70.
The rules in one table
| Rule | Detail |
|---|---|
| Who can convert | Active participants, separated or retired participants, and spouse beneficiary participants. Non-spouse beneficiaries cannot. |
| What can be converted | Any traditional balance: your contributions, agency automatic and matching contributions, and money rolled into the TSP. Tax-exempt contributions convert pro rata with taxable dollars. |
| Minimum and frequency | $500 per conversion; up to 26 conversions per calendar year per account (civilian and uniformed services accounts count separately). |
| Required minimum distributions | If you are at RMD age (73, or 75 if born in 1960 or later), take the year's RMD before converting. An RMD cannot be converted. |
| Mutual fund window | Money in the mutual fund window must be moved back to the core funds before it can be converted. |
| Spousal consent | Not required. |
| Tax withholding | None. Pay from outside the TSP via estimated payments. |
| Reversal | Not allowed once processed. |
Who benefits most from a TSP Roth conversion?
Three groups tend to come out ahead, for different reasons.
Early career
If your income and traditional balance are both likely to grow a lot, paying tax now at a lower bracket builds a meaningful Roth bucket early. Watch the mix: a household already saving heavily into Roth TSP and Roth IRAs may not need to convert at all. The decision is about your overall traditional-Roth-taxable balance, not the conversion feature.
Mid-career and high earners
This is where it gets nuanced. A large conversion can push you into the next bracket, and in your peak-earning years that usually means paying 32% or 35% now to avoid a rate that may be lower later. Two exceptions: a gap year after leaving federal service, and a year with unusual deductions. One related rule since 2026: if your prior-year Social Security wages exceeded $150,000, your catch-up contributions (age 50 and over) must be Roth, which already shifts high earners toward Roth whether they convert or not.
Retirees, especially federal retirees before Social Security
For Sam and Dan the window is clear. Sam retires at 57, receives the FERS supplement until 62, and then the couple's taxable income drops because the FERS supplement ends at 62 and they plan to delay Social Security to 70. From 62 to 70 they can convert each year up to the top of the 22% or 24% bracket, paying tax from a taxable brokerage account. That is the strategy we describe in Roth conversions in the gap years.
Two clocks run alongside that window. Medicare looks back two years for IRMAA, so conversions at 63 and 64 set the Part B premium at 65 and 66; how IRMAA works and the two-year lookback explains the thresholds, and Medicare Part B with FEHB covers the federal side. And under the 10-year rule, adult children must empty an inherited traditional TSP or IRA within ten years, so converting decides whether they inherit taxable or tax-free money; see what your heirs inherit from the TSP.
When converting is a mistake
- You would pay the tax from the TSP or from money you need within five years. The math only works when the tax comes from savings that would otherwise sit in a taxable account.
- You are in a peak-earning year. Converting at 32% to avoid 22% later is backwards. Wait for the gap year.
- You are 63 or 64 and have not checked IRMAA. A conversion that crosses an IRMAA threshold raises Part B and Part D premiums for a full year, for both spouses on a joint return.
- You are counting on reversing it. Recharacterization ended in 2018; TSP conversions are final.
A Roth conversion is not a backdoor Roth. A backdoor Roth is a nondeductible IRA contribution followed by a conversion for people over the Roth IRA income limits; an in-plan conversion moves existing pre-tax money. The two can coexist, but they solve different problems.
Bottom line
The feature is worth having, and for a federal couple in the bridge years it can be worth a great deal. But the excitement belongs to the window, not the button. Size each conversion to a bracket, pay the tax from outside the plan on the estimated-payment schedule, check the IRMAA lookback, and decide what you want your children to inherit. It sits alongside the other decisions in the five biggest federal retirement mistakes.
If you want a year-by-year conversion plan modeled for your household, book a call. More guides are on our hub for federal employees.
FAQ: TSP Roth in-plan conversions
Does the TSP withhold taxes on a Roth in-plan conversion?
No. The full converted amount is added to your taxable income for the year, and the TSP withholds nothing. You pay the federal and state tax from personal funds, normally through quarterly estimated payments due April 15, June 15, September 15, and January 15. You cannot use part of the conversion to pay the tax.
How many times a year can I convert?
Up to 26 conversions per calendar year per TSP account, with a $500 minimum each time. A participant with both a civilian and a uniformed services account could make 26 in each. Spreading conversions through the year lets you match each one to your bracket, but most households need only a few.
Can I convert after I retire from federal service?
Yes. Separated and retired participants can convert, and so can spouse beneficiary participants; non-spouse beneficiaries cannot. If you have reached required minimum distribution age, you must withdraw the year's RMD before converting, because an RMD itself cannot be converted to Roth.
Does a TSP Roth conversion count toward IRMAA?
Yes. The converted amount raises your modified adjusted gross income, and Medicare uses your return from two years earlier to set Part B and Part D surcharges. A conversion at 63 affects premiums at 65. Check the joint thresholds before converting in the two years before Medicare.
Is a TSP Roth conversion the same as a backdoor Roth?
No. A backdoor Roth is a nondeductible IRA contribution followed by a conversion, used by people above the Roth IRA income limits. A TSP in-plan conversion moves existing pre-tax money to your Roth TSP balance and is taxable in full. They address different problems and can be used together.
Sources
- TSP, Roth in-plan conversions
- Federal Register, Roth In-Plan Conversions final rule, January 15, 2026
- IRS, Retirement topics: catch-up contributions (Roth catch-up rule)
- IRS, Form 1040-ES estimated tax
- Maryland Comptroller, pension exclusion
This material is for informational purposes only and does not constitute tax, legal, or investment advice. Sam and Dan are a hypothetical composite household, not clients. To qualify for tax-free withdrawals of earnings, you generally must be 59½ and have held Roth funds for five years; each conversion has its own five-year period for the converted amount, and early withdrawals may be subject to a 10% penalty unless an exception applies.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Allset Wealth.