As of January 28, 2026, federal employees can convert their traditional TSP balance directly to a Roth TSP balance, no rollover to an outside account required. It’s called a Roth in-plan conversion, and it’s one of the more significant changes to the TSP in recent memory. If you’ve been sitting on a large traditional TSP balance and wondering whether converting to Roth makes sense, the TSP now has a dedicated Roth In-Plan Conversion Calculator to help you compare both paths side by side.
Traditional vs. Roth: The Basic Difference
With a traditional TSP, your contributions go in pre-tax, which lowers your taxable income today. The money grows tax-deferred, but every dollar you withdraw in retirement is taxed as ordinary income, including decades of earnings on top of what you originally put in. With a Roth TSP, contributions are made with after-tax dollars, so there’s no upfront tax break. But the money still grows, and qualified withdrawals in retirement are completely tax-free, principal and earnings both.
The Core Question: Will Your Tax Rate Be Higher in Retirement?
Federal retirees often end up with more taxable income than they expect. A FERS pension, Social Security, and traditional TSP distributions can stack quickly, potentially pushing you into a higher bracket than you were in during your working years. If that describes your situation, paying taxes now at today’s rate may leave you better off in the long run.
On the other hand, if you expect your retirement income to be modest, or if you live in a high-tax state now but plan to retire somewhere with no state income tax, staying in traditional may make more sense.
This is exactly what the TSP’s Roth in-plan conversion calculator is designed to help you think through. It asks for your current and projected tax rates, your estimated rate of return, and your withdrawal timeline, then shows you the estimated after-tax outcome of each path.
Who Can Do a TSP Roth In-Plan Conversion?
You’re eligible if you’re a TSP participant, active, separated, or a spousal beneficiary, with at least $500 in a vested traditional TSP balance. A few mechanics worth knowing:
- You must leave at least $500 in your traditional balance per payroll contribution source after converting
- You can do up to 26 conversions per calendar year
- If you’re subject to required minimum distributions (RMDs), you must satisfy that year’s RMD before doing a conversion; you cannot use a conversion to fulfill your RMD requirement
- Converted amounts will appear on your 1099-R the following January and do not count against your annual TSP contribution limits
A Note on Estimated Taxes
One thing that catches people off guard: if you do a large TSP Roth in-plan conversion, you may owe estimated tax payments quarterly, not just when you file in the spring. Converting $30,000, for example, adds $30,000 to your taxable income for that year. If you wait until you file to pay the resulting tax, you could face an underpayment penalty. A tax advisor can help you figure out the right approach.
Because the converted amount gets added to your taxable income for the year, the size of the conversion matters. Converting too much in one year can push you into a higher bracket and erase the benefit. Many people find it makes more sense to spread conversions across several years rather than converting a large balance all at once.
When a TSP Roth In-Plan Conversion Probably Doesn’t Make Sense
The TSP itself offers clear guidance here. A Roth in-plan conversion may not be right for you if:
- You expect your tax rate to be lower in retirement than it is today
- You don’t have personal funds outside your TSP to cover the taxes owed on the conversion
- You’ll need to access the converted funds within five years — each conversion carries a five-year waiting period, and early withdrawals may trigger a 10% penalty unless an exception applies, such as being age 59½ or older
- You’re younger and still building your balance; in that case, simply directing your ongoing contributions to the Roth TSP is usually a cleaner approach
How to Run the Numbers
Start with the TSP Roth In-Plan Conversion Calculator at TSP.gov. If you’re eligible, a personalized version in My Account uses your actual balance data for a more accurate picture.
A Federal Retirement Consultant (FRC®) can help you determine a conversion amount and timeline that makes sense for your income, your goals, and your tax situation.
This is Part 1 of a 3-part series on Roth and the TSP. Part 2 will cover what happens to your Roth TSP when you die and why it matters for your estate plan.
