Is A TSP Roth Conversion the Right Choice for You?

A Roth conversion inside the Thrift Savings Plan is one of the most talked‑about features for federal employees, especially with the rollout of the new Roth in‑plan conversion feature beginning in 2026. A conversion lets you move money from your traditional (pre‑tax) TSP balance into your Roth (after‑tax) balance, paying taxes now so that future withdrawals—both contributions and earnings—can be tax‑free in retirement.

What a TSP Roth Conversion Actually Does

A Roth in‑plan conversion shifts the timing of taxation. Traditional TSP dollars haven’t been taxed; converting them to a ROTH triggers income tax in the year of conversion. The converted dollars grow tax‑free going forward, and qualified withdrawals in retirement are not taxed.

Federal employees who anticipate being in a higher tax bracket later, or who want to reduce taxable income in retirement, can benefit from a conversion. The TSP confirms that conversions can be done during your working years and even in retirement, as long as you have a traditional balance that meets eligibility rules.

Beginning January 2026, all TSP participants will have access to this feature. If you don’t already have a Roth TSP balance, your first conversion automatically creates one.

Why Consider a ROTH Conversion?

There are several factors that make Roth conversions attractive for anyone with a retirement account. Federal employees may find them especially relevant for the following reasons:

Tax diversification — Many federal retirees rely on a combination of their annuity, TSP withdrawals, and Social Security. Having a traditional and Roth account provides more flexibility when managing taxable income year‑to‑year.

Future taxes — A conversion locks in your taxes at the conversion date tax rate. Tax laws are subject to change, and this action eliminates uncertainty down the road.
Retirement horizons — Federal employees, especially those working in early retirement career fields, often retire in their early 50s or early 60s. Roth dollars can grow tax-free for decades.
Required Minimum Distributions (RMDs) — Traditional TSP balances require annual RMDs once you reach age 73; Roth TSP balances don’t require RMD withdrawals. This reduces future taxable income.

I converted half of my business IRA to a ROTH in 2011 under the special rule at the time that allowed those converting to a ROTH to spread the federal tax owed over a two-year period. As I reflect on that decision, I wish I had converted the entire amount to a Roth; my account balance has increased 358% in the past 15 years, all tax-free growth! This has dramatically reduced my RMDs year-over-year, thanks to the conversion.

Key Considerations Before Converting

There’s no TSP fee to convert money to Roth, but the amount you convert is added to your taxable income for the year. This could significantly raise your tax bill in the year of the conversion. You must pay the income tax on the conversion amount using personal funds from another source, such as a savings account. You cannot use part of the amount you’re converting to pay taxes.

A Roth in-plan conversion cannot be reversed or changed. Before you make a decision, you can’t undo, the TSP strongly recommends that you talk to a tax advisor.

Another concern is for those on Medicare who pay Part B and D premiums. Your Medicare premiums are determined by your Income Required Monthly Adjusted Amount (IRMAA). If your Roth conversion increases your annual taxable income over certain limits, your Medicare premiums will increase. For example, if your conversion is in 2026, Medicare will use this income reported on the tax return you file by April 15^th in 2027 to determine your 2028 premiums, which are based on a two-year lookback.

Roth conversions are most beneficial during low‑income years, such as the period between when you retire and when you begin collecting your Social Security benefits. Also, consider making the conversion before age 73 when RMDs come into play.

The sooner you make the conversion, the more time the Roth has to grow over the years. However, tax consequences should be carefully evaluated. The TSP emphasizes that conversions can be beneficial for some but not all participants.

Developing a Conversion Strategy

The TSP has several tools, including a comprehensive Roth in-plan conversion calculator, to help participants evaluate the tax impact and long‑term benefits of converting to a Roth. These strategies can be used:

Take it slow with small annual conversions to avoid going into a higher tax bracket.
Bridge‑period conversions during early retirement years when income is temporarily lower.
One‑time strategic conversions when a unique low‑income year occurs (e.g., unpaid leave, part‑time transition, or a year with unusually high deductions).

A well‑planned Roth conversion can strengthen your long‑term retirement income strategy, but the right timing and amount depend heavily on your tax situation, retirement date, and income sources.

Helpful Retirement Planning Tools

Disclaimer: The information provided may not cover all aspects of unique or special circumstances. Federal regulations, medical procedures, investment information, and benefit details are subject to change. To ensure the accuracy of this information, contact relevant parties for assistance, including OPM’s retirement center. Over time, various dynamic economic factors relied upon as a basis for this article may change.

The information contained herein may not be suitable for your situation. This service is not affiliated with OPM or any federal entity. You should consult a financial, medical, or human resource professional where appropriate. Neither the publisher nor the author shall be liable for any loss or other commercial damages, including but not limited to special, incidental, consequential, or other damages.

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Dennis Damp

Dennis V. Damp is an author, retired federal manager, business owner, career counselor and veteran. Damp is the author of 28 books, a recognized benefits expert, and a retired federal manager with 35 years’ service. Dennis has been a guest on hundreds of radio talk shows, CNN’s YOUR MONEY and the Lou Dobbs Cable TV shows, lectured at universities and colleges, produced Internet web sites and training videos, and has written hundreds of articles for national magazines and newspapers. His books have been featured in the Wall Street Journal, Washington Post, New York Times and U.S. News & World Report.

Dennis joined the Air Force in 1968 and spent over three years on active duty and an additional seven years with the Air National Guard. He was hired by the Department of Defense (DOD) after leaving active duty and transferred to the Federal Aviation Administration (FAA) in 1975. He spent the remainder of his career in various positions with the FAA. His last position was technical operations manager at the Pittsburgh International Airport’s air traffic control tower.