Starting in late January 2026, Thrift Savings Plan (TSP) participants and spousal beneficiaries will be able to convert money from a traditional TSP balance to a Roth within their TSP account. This transaction is called a “Roth in-plan conversion.”
When a TSP participant converts money from their traditional TSP balance, the taxable Roth in-plan conversion amount will become part of the participant’s taxable income for the year. This means that they will pay income tax on the taxable conversion amount based on their income tax rate.
What is the difference between a traditional TSP and Roth TSP?
Traditional TSP
With the traditional TSP, contributions go into a participant’s TSP account before tax withholding, which can potentially lower a participant’s current income tax rate. But when they take money from the traditional TSP, they will pay taxes on both their contributions and earnings at the income tax rate of the year you make the withdrawal.
Roth TSP
TSP account contributions a Roth TSP contribution gets taxed before the participant contributes to it. It’s part of the participant’s taxable income for the year the contribution is made. and the usual tax withholding applies.
RECOMMENDED READING: Roth vs. Traditional TSP: Which One Should You Choose? written by Ed Zurndofer
How does a TSP Roth in-plan conversion affects your taxes?
According to the TSP, the first questions you should ask yourself when you consider doing a Roth in-plan conversion are about the immediate effects on taxes you would owe:
1. How will it affect my taxable income for the year?
2. How much income tax will I need to pay on the amount of money I convert?
3. Will this conversion raise my federal marginal tax rate?
4. Do I have enough money to pay the income tax on the conversion?
“We strongly recommend that participants speak to a tax advisor before requesting a Roth in-plan conversion,” the TSP wrote in an announcement. “Roth in-plan conversions are irrevocable — once the transaction is processed, the transaction cannot be reversed or changed.
SEE ALSO: Tax Consequences of a Roth In-Plan Conversion
Deciding whether a Roth in-plan conversion is right for you
Accordingn to the TSP, participants can do a Roth in-plan conversion at any time while working and in retirement. A tax advisor can help particpants decide whether a Roth in-plan conversion would be an advantage to them and when the best time would be to do one. Many particpants choose to do conversions during years that they have less income and have a lower marginal tax rate.
Here’s a helpful table from TSP.gov:
Who is Eligible for a Roth in-plan conversion?
Active and Separated TSP Participants
Active and separated participants with a total eligible vested balance of at least $500 are eligible to request a conversion. Participants must maintain at least $500 (“hold back amount”) in each non-Roth payroll account source. If a source is below the $500 minimum balance, the source will not be eligible and will not be included in the calculation/conversion.
TSP Spousal Beneficiaries
Spousal beneficiaries with a balance of at least $500 are eligible to request a conversion. Spousal beneficiaries are not subject to the $500 “hold back amount.”
How often can eligible TSP participants perform a Roth in-plan conversion?
Eligible TSP participants can request a maximum of 26 Roth conversions per account in a calendar year. If a participant has both Civilian and Uniformed Services accounts, and meets the above account balance limitations, they can request 26 conversions per account per year.
How do eligible TSP participants request a Roth in-plan conversion?
Eligible participants and spousal beneficiaries can request a Roth in-plan conversion via the My Account section on TSP.gov. Requests can be made as a specific dollar amount (the default option), or as a percentage of the participant’s eligible funds. The minimum amount that can be converted is $500 (note: if a participant chooses a specific dollar or percentage and the amount falls to less than $500 after the market closes, the conversion will still be processed for the amount available). Spousal consent is not required to complete a conversion.
What is the minimum amount that can be converted from a traditional TSP to a Roth TSP?
The minimum total amount that can be converted in a single request is $500. Eligible participants in an Active or Separated employment status must leave $500 in each non-Roth payroll account source (Traditional, Tax-exempt, Automatic 1%, and Agency Match accounts) to support potential future payroll corrections. The Rollover source does not have a hold back amount.
Per IRS rules once a participant converts traditional funds to Roth, the transaction cannot be reversed or changed, per IRS rules.
More information on TSP Roth in-plan conversions
My Federal Retirement columnist, Ed Zurndorfer, will provide more details on the pros and cons of performing a TSP Roth in-plan conversion in an upcoming issue. To subscribe to the free email newsletter, click here.
More information from the TSP is here: