TSP Roth Conversion: Should I be excited?
Like many other 401(k) plans, the TSP is finally adding in-plan Roth conversions starting January 2026. How exciting!
What Is It?
Pretty straightforward: you have pre-tax money in your TSP, and you convert it to a Roth TSP.
• If you’ve already contributed to Roth TSP before, the conversion simply shifts money internally from Traditional to Roth.
• If this is your first time, the conversion will automatically create your Roth TSP.
Tax Consequences
• In-plan Roth conversions are taxable to you.
• Once you convert, it cannot be reversed.
• Taxes must be paid using personal funds, not from your Traditional TSP balance.
Eligibility
Who can participate in the Roth in-plan conversion?
• Active TSP participants
• Retired or separated participants
• Spouse beneficiaries
(Non-spouse beneficiaries are not eligible.)
What Parts of Your Balance Can You Convert?
Pretty much all Traditional TSP components:
• Your own contributions
• Agency matching
• Money rolled into the TSP
If you have tax-exempt contributions, the taxable portion of your conversion will follow the same proportion of tax-exempt vs. taxable dollars in your Traditional TSP.
Minimum Amount and Frequency
• Minimum per conversion: $500
• Maximum frequency: Up to 26 conversions per calendar year per TSP account
If you have both a civilian TSP and a uniformed services TSP, that could be 52 conversions a year (which would be an administrative nightmare if you did all 52).
No spousal consent is required for in-plan conversions.
If you are at RMD age, you must take your RMD first before converting.
You also cannot convert money in the Mutual Fund Window.
Planning Opportunities and Considerations
There are three categories of people who may benefit most from in-plan conversions.
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This depends on your overall mix of Traditional, Roth, and taxable brokerage assets.
If you expect your future income and Traditional TSP balance to grow significantly, conversions can help you:
1 Build a meaningful Roth bucket on your balance sheet.
2 Pay taxes now so you don’t have to pay taxes later.
This provides more control over your future tax planning.
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This becomes more nuanced. You need to monitor your marginal tax bracket — a large conversion could push you into a higher bracket.
Starting in 2026, if you’re over age 50 and your prior-year wages exceed $145,000, your catch-up contributions must be Roth. That makes your overall Roth strategy even more important.
If you’ve left federal service and have a low-income gap year, that might be a great time to do some in-plan conversions.
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In early retirement, before Social Security begins, you may have a window to do Roth conversions while still in a lower tax bracket.
Once you reach age 65, be mindful of IRMAA—the income-related monthly adjustment amount added to your Medicare Part B and Part D premiums.
For estate planning, consider what type of account you want to leave to your children. Under the 10-year rule, they must empty inherited accounts within 10 years. Would you rather they inherit Traditional (taxable) funds or Roth (tax-free) funds?
A Roth conversion—sometimes called a backdoor Roth strategy—is a way to contribute to a Roth IRA/Roth TSP when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting. To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA/TSP for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions. This material is for informational purposes only and does not constitute tax, legal, or investment advice.