The Thrift Savings Plan continues to evolve, introducing new features while driving substantial growth for its participants. A groundbreaking option for Roth conversions will become available in 2026, giving federal employees and military personnel new ways to manage their retirement savings. Meanwhile, the rising number of TSP millionaires underscores the program’s potential for wealth accumulation, fueled by strong stock market performance.
Roth Conversion: A New Opportunity for Tax-Free Growth
Beginning in 2026, TSP account holders can convert traditional account balances into Roth accounts, offering greater flexibility in tax planning. This conversion involves paying taxes on the transferred amount, similar to a withdrawal, but ensures future withdrawals (and earnings) are tax-free if Roth requirements are met. Note that taxes owed on the conversion must be paid out of pocket, as TSP funds cannot be used for this purpose.
Here’s a quick comparison of TSP options:
- Traditional: Contributions are pre-tax, but withdrawals (including earnings) are taxed.
- Roth: Contributions are after-tax, and both withdrawals and earnings are tax-free if conditions are satisfied.
One of the key benefits of Roth accounts is their exemption from required minimum distributions (RMDs), unlike traditional accounts where RMDs begin at age 73. However, it’s important to note that agency contributions for FERS are always made to traditional accounts.
The Growing Ranks of TSP Millionaires
The number of TSP account holders with balances of $1 million or more has soared in 2024, climbing from just under 117,000 at the start of the year to over 155,000 by September 30. This milestone reflects strong market performance, particularly in the TSP’s stock-based funds, which have delivered robust returns year-to-date.
- TSP Millionaires: Now more than 155,000, representing about 2% of the 7.1 million account holders.
- Accounts with $750,000–$1 Million: Increased by 14,000, reaching about 122,000.
- Accounts with $500,000–$750,000: Rose by 20,000 to approximately 245,000.
- Accounts with $250,000–$500,000: Grew by 17,000 to around 592,000.
The average account balance has also seen significant growth. As of October, FERS participants averaged $192,000 per account – up $16,000 from the start of the year.
Planning Ahead
With the new Roth conversion feature on the horizon and the TSP delivering record account balances, now is an ideal time for participants to review their retirement strategies. Consult with an FRC® trained advisor to ensure you’re making the most of these opportunities as you plan your financial future.
