TSP Roth Conversions
This month, the TSP will begin allowing Roth Conversions. Previously, you would have to 1. Separate from service 2. Roll your traditional TSP balance into a Traditional IRA at brokerage firm (like Schwab or Vanguard), then 3. Begin the conversions. Now, you can do it all in the TSP ecosystem. See below details from the latest TSP email-
"Optional Roth in-plan conversions available January 28 to all participants
Starting January 28, 2026, you’ll have the option to convert money in your traditional (pre-tax) balance to your Roth (after-tax) balancen your TSP account.
Roth in-plan conversions are available to all TSP participants:
- Active participants (current federal civilian employees and uniformed services members)
- Separated and retired participants
- Spouse beneficiary participants
You don’t have to have a Roth TSP balance to do a Roth in-plan conversion. If you don’t have a Roth TSP balance, your first Roth in-plan conversion will create one in your TSP account.
If you’re considering doing a Roth in-plan conversion, we strongly recommend that you consult a tax advisor. When you convert pre-tax money from your traditional TSP balance, your Roth in-plan conversion amount becomes part of your taxable income for the year. This means that you’ll pay income tax on the conversion amount based on your income tax rate. 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."
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Comments
Too little too late. I retired last summer so I’ll just roll over at Vanguard. It would’ve been nice if it had happened 10 years ago and I could roll over while I was still working at least a little bit.
Nooo that's the worst. Congrats on retiring though.
Great, but.... My funds in brokerage account earn more than in tsp. Brokerages have more and better investment options. IMHO.
While on active duty I was able to save about ~$150,000 in the traditional TSP. My balance is now over $700K. My plan is to start converting ~$100K per year for 3 years into the ROTH TSP once I retire from my second career next year at the age of 56. This will keep my income tax liability at just under $200K for three years before I turn 59 1/2 (this includes my military retirement and the tax to be calculated on the conversion amount). I will pay the out of pocket taxes on the conversions from my HYSA. Starting at 59 1/2 I plan on taking monthly traditional TSP withdrawals to the tune of $7,500 per month until the traditional portion of the TSP is exhausted. My goal is to remain under the qualified income IRMAA threshold beginning when I'm 63, and to have several pots of money to draw upon. Anyone have a better strategy? What am I missing? Is there a better, more tax efficient way? TIA ~ BW.
I’m definitely not a tax expert or professional, but these are my thoughts. I’d recommend working with a CPA to get definitive answers.
- Overall, this looks like a deliberate, well-thought-out plan tailored to your situation.
- Converting ~$100k/year makes sense, but I’d keep a close eye on marginal tax brackets given your other income streams. It’s usually best to evaluate lifetime tax impact, not just the annual bill.
- In-plan conversions are convenient, but an IRA can still offer more flexibility later (withdrawal ordering, investment options, etc.). Some people still roll part of their TSP to an IRA post-retirement for that added control, even if they do initial conversions inside TSP.
I know that I don't hit every part of your plan, but I hit the parts I'm comfortable analyzing.
It's about time.