TSP Roth Conversion Arrives January 2026

The Thrift Savings Plan (TSP) has announced that starting in January, participants will be able to convert their traditional TSP balances into Roth balances. This new feature gives federal employees and retirees another tool for managing retirement savings and long-term tax planning.

Traditional vs. Roth: The Basics

• Traditional TSP: Contributions are made pre-tax, lowering taxable income now, but withdrawals (including earnings) are taxed later.
• Roth TSP: Contributions are made after taxes, but qualified withdrawals are tax-free. Roth balances also avoid required minimum distributions (RMDs) at age 73. Agency matching contributions for FERS employees will still go into the traditional TSP. 

How a TSP Roth Conversion Works

Converting involves moving pre-tax funds from a traditional TSP to a Roth balance. According to the TSP:

• “If you don’t have a Roth balance in your TSP account, your first Roth in-plan conversion will create one.”
• “When you convert pre-tax money from your traditional TSP balance, your Roth in-plan conversion amount will become part of your taxable income for the year.”
• Taxes on the conversion must be paid from outside funds (not from the TSP account).

Because conversions trigger taxable income, the TSP advises consulting a tax professional before moving forward. A new TSP calculator is also in development to help estimate tax liability.

Additional Details

• Available to: active participants, separated employees, and spousal beneficiaries
• Minimum conversion: $500
• Tax reporting: TSP will report the taxable amount to the IRS but will not withhold taxes
• Current Roth participation: 2.82 million account holders hold $81 billion in Roth balances (as of July)

If you’re unsure whether an in-plan Roth conversion is right for you, consider speaking with a Federal Retirement Consultant (FRC®) to get a personalized benefits analysis and guidance.