Key Takeaways
- The in-plan TSP Roth conversion option opened January 28, 2026, authorized by SECURE 2.0 (2022).
- Each conversion requires a $500 minimum, and you can run up to 26 conversions per year.
- The converted amount is taxed as ordinary income and no tax is withheld, so you pay from outside funds.
- A conversion has no income limit, unlike Roth IRA contributions, which phase out at $153,000 to $168,000 single and $242,000 to $252,000 joint in 2026.
- Roth TSP balances carry no required minimum distributions under SECURE 2.0 (effective 2024); RMDs otherwise begin at age 73, or 75 for those born in 1960 or later.
- Roughly 30,000 federal employees and retirees had used the option since launch, according to Federal News Network.
- In 2026 the married-joint 32% bracket starts at $403,550 and the single 32% bracket at $201,775.
TSP In-Plan Roth Conversion Rules (2026)
Figures reflect the 2026 TSP in-plan Roth conversion rules and the CMS 2026 base Part B premium.
A TSP Roth conversion moves money from the traditional (pre-tax) side of your Thrift Savings Plan to the Roth side, and as of January 28, 2026 federal employees can do it directly inside the plan with no rollover to an outside IRA. This guide explains the new in-plan option, the tax you owe, the rules that trip people up, and how much to convert, with a focus on high-balance TSP holders.
Plan Your TSP Conversion Strategy
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A TSP Roth conversion transfers pre-tax traditional TSP dollars into Roth TSP dollars inside the plan. The converted amount counts as ordinary income in the conversion year, and no tax is withheld, so you pay from outside funds. The option opened January 28, 2026, requires a $500 minimum per conversion, allows up to 26 conversions per year, and cannot be reversed.
What is the new TSP in-plan Roth conversion?
The new TSP in-plan Roth conversion lets you move traditional (pre-tax) TSP money into Roth TSP money without leaving the plan. The dollars never touch an outside IRA. Only the tax treatment changes: the converted amount becomes taxable ordinary income now, and qualified withdrawals later come out tax-free. It launched January 28, 2026, with a $500 minimum per conversion.
Before 2026, building Roth dollars from a traditional TSP meant working around the plan. The common path was to separate from federal service or take a partial withdrawal, roll the money to a private IRA, then convert the IRA to a Roth IRA. That worked, but it added custodians, rollover timing risk, and the once-per-12-months IRA rollover limitation.
The in-plan conversion removes that detour. You request the conversion inside the TSP, the traditional balance drops by the converted amount, and the Roth balance rises by the same amount. There is no separate account and no inter-custodian transfer. This page covers the new mechanic and the sizing strategy behind it. For the broader federal overview, see our sibling guide on what federal employees need to know about TSP Roth conversions.
| Feature | Old workaround (pre-2026) | New in-plan conversion (2026) |
|---|---|---|
| Steps | Separate or withdraw, roll to IRA, convert IRA to Roth | Log in, request, choose amount, submit |
| Custodians | TSP plus a private IRA custodian | TSP only |
| Once-per-12-months IRA rollover limit | Applies | Does not apply |
| Minimum | Varies by custodian | $500 per conversion |
| Conversions per year | Limited by rollover rules | Up to 26 |
| Reversible | No | No |
When did TSP in-plan Roth conversions become available?
TSP in-plan Roth conversions became available on January 28, 2026. That is the effective date the Federal Retirement Thrift Investment Board opened the feature inside the TSP “my account” portal. Since launch, roughly 30,000 federal employees and retirees have used it, according to Federal News Network, a small share of the eligible audience and a sign the awareness gap is wide.
The change stems from SECURE 2.0, the 2022 law that authorized in-plan Roth conversions for federal plans and also removed required minimum distributions from Roth accounts inside employer plans starting in 2024. The TSP needed time to build the feature, which is why the on-plan date arrived in January 2026 rather than earlier.
The low uptake matters for planning. A feature used by only about 30,000 people out of millions of TSP participants means most eligible federal households either do not know it exists or have not modeled whether it helps them. Availability is not the same as a good decision, and the sizing question below is where the real value sits.
Who is eligible for a TSP Roth conversion?
Three groups can request a TSP Roth conversion: active federal employees still contributing, separated federal employees and retirees who keep a TSP balance, and spousal beneficiaries who hold a beneficiary participant account. There are no income limits on a conversion, unlike Roth contributions. Anyone with a traditional TSP balance and access to the “my account” portal can convert.
The no-income-limit point is worth stressing. Roth TSP and Roth IRA contributions phase out at higher incomes (the Roth IRA contribution phase-out runs $153,000 to $168,000 for single filers and $242,000 to $252,000 for joint filers in 2026). A conversion has no such cap. A federal household earning well into six figures can still convert.
- Active employees: can convert traditional TSP balances while still working, subject to the same tax treatment.
- Separated employees and retirees: often a well-positioned group, because the gap years between retirement and RMD age can carry lower taxable income.
- Spousal beneficiaries: those holding a beneficiary participant account can convert as well.
How does a TSP in-plan Roth conversion work?
A TSP in-plan Roth conversion is a four-step request inside the plan: log into the TSP “my account” portal, request a Roth in-plan conversion, choose the dollar amount, and submit. The minimum is $500 per conversion, you may run up to 26 conversions per year, and each conversion is irreversible once processed. The TSP also offers an in-plan Roth conversion calculator to estimate the tax.
- Log into the TSP “my account” portal.
- Select the in-plan Roth conversion request.
- Choose the amount to convert (minimum $500).
- Review the estimate in the TSP conversion calculator and submit.
After processing, the traditional TSP balance falls by the converted amount and the Roth TSP balance rises by the same amount. The dollars stay inside the plan. You can convert up to 26 times per year, which supports a laddered, spread-out approach rather than one large event.
Two features deserve emphasis. First, the conversion is irreversible: unlike the pre-2018 IRA recharacterization, you cannot undo a TSP conversion, so the amount can be modeled before you submit. Second, no tax is withheld from the conversion, which is covered next.
How much tax do you pay on a TSP Roth conversion?
You pay ordinary income tax on the full converted amount in the year you convert. The conversion stacks on top of your other income, so its rate depends on the brackets it fills. In 2026, the married-joint 22% bracket starts at $100,800 and the 32% bracket at $403,550; for single filers the 32% bracket starts at $201,775. The conversion is uncapped, taxable, and due by December 31.
A conversion is taxed like any other ordinary income: it lands on top of your federal pension, wages, Social Security, and other distributions, then fills the remaining space in your brackets. It is not a capital gain and it is not itself net investment income, though a large conversion can raise your modified adjusted gross income and affect other exposures such as the 3.8% net investment income tax that applies above $200,000 of modified adjusted gross income for single filers and $250,000 for joint filers.
The table below shows the 2026 federal ordinary-income brackets a conversion fills, using the amounts confirmed for tax year 2026.
| Rate | Single filer taxable income starts at | Married filing jointly starts at |
|---|---|---|
| 22% | $50,400 | $100,800 |
| 24% | (above the 22% band) | (above the 22% band) |
| 32% | $201,775 | $403,550 |
| 35% | $256,225 | $512,450 |
| 37% | $640,600 | $768,700 |
The 2026 standard deduction is $16,100 for single filers and $32,200 for married-joint filers, with an added $2,050 (single) or $1,650 per spouse for those 65 and older. Households 65 and older may also qualify for the temporary senior deduction of $6,000 per person under OBBBA (P.L. 119-21) for tax years 2025 through 2028. These reduce the taxable income the conversion stacks onto.
Are taxes automatically withheld from the conversion?
No. The TSP does not automatically withhold tax from an in-plan Roth conversion. The full converted amount is added to your taxable income, and you are responsible for paying the resulting tax from outside sources: estimated quarterly payments, withholding adjustments on other income, or non-TSP savings. Paying the tax from the TSP itself shrinks the benefit and can trigger a penalty if you are under 59.5.
This is a common surprise. Because nothing is withheld, a household that converts $80,000 needs the cash to cover the added tax outside the plan. If you are under age 59.5 and pull TSP dollars to pay that bill, the withdrawn amount can face the 10% early-withdrawal penalty, which is exactly what a conversion is meant to avoid. Sizing the conversion to available outside cash is part of the plan.
What are the two five-year rules and why do they matter?
Two separate five-year clocks apply to Roth TSP money. The first governs tax-free earnings: withdrawals of earnings are qualified only after five years have passed since your first Roth TSP contribution or conversion and you are at least 59.5. The second applies to each conversion for the 10% early-withdrawal penalty: converted principal withdrawn before its own five-year mark, and before 59.5, can be penalized.
The rules are independent, and confusing them causes costly errors. The first clock starts January 1 of the year of your earliest Roth TSP contribution or conversion. Once it is satisfied and you are 59.5 or older, all Roth TSP earnings come out tax-free. If you already met that clock years ago through Roth TSP contributions, it is met for later conversions too.
The second clock is per conversion and matters mainly to people under 59.5. Each conversion has its own five-year window during which the converted amount, if withdrawn early, can be hit with the 10% penalty (you already paid income tax at conversion). For most retirees over 59.5, the penalty clock is a non-issue. For younger federal employees converting while working, it is central to timing.
How does a conversion affect my RMDs, IRMAA, and Social Security?
A TSP Roth conversion lowers future required minimum distributions by shrinking the traditional balance, because Roth TSP is no longer subject to RMDs under SECURE 2.0 (effective 2024). But the conversion raises current modified adjusted gross income, which can lift Medicare IRMAA surcharges two years later and increase the share of Social Security that is taxable. The trade is higher tax now for lower forced income later.
RMDs. Required minimum distributions begin at age 73, or age 75 for those born in 1960 or later (the earliest age-75 RMD year is 2035). Every dollar you convert out of the traditional TSP is a dollar that never generates a future RMD, and Roth TSP balances carry no RMD at all. Our 2026 required minimum distribution guide covers the timing details.
IRMAA. Medicare income-related monthly adjustment amounts raise Part B and Part D premiums when modified adjusted gross income exceeds $109,000 (single) or $218,000 (joint) in 2026. IRMAA uses a two-year lookback, so a conversion at 63 can raise premiums at 65. The 2026 base Part B premium is $202.90. The last conversion year that does not affect any future Part B premium is age 62.
Social Security. A conversion increases provisional income, which can push more of your Social Security benefit into the taxable column (up to 85% can be taxable). Coordinating the conversion with your Social Security claiming age and your FERS or CSRS pension start date is part of sizing it correctly.
Should I convert my entire TSP balance at once?
Almost never. Converting an entire large TSP balance in one year usually pushes the household into the 32%, 35%, or 37% bracket and triggers the highest IRMAA tier. Most optimized federal plans spread conversions across several years to control the rate. But the common “fill the current bracket and stop” rule is also a trap for high-balance holders, as explained below.
The standard advice is to convert only up to the top of your current marginal bracket so no dollar is taxed at a higher rate. For households with modest balances, that is often reasonable. The problem is that while you carefully avoid a higher bracket today, the traditional TSP keeps compounding, and federal pension plus Social Security plus eventual RMDs can force you into those higher brackets permanently later.
The right amount is a multi-year question, not a single-year one. Converting too little leaves the RMD problem intact; converting too much in one year wastes bracket space. A break-even view helps you weigh the up-front tax against the later savings, which we walk through in our Roth conversion break-even analysis, and the December 31 timing sets the annual deadline to act.
When does a TSP Roth conversion make sense for a TSP Millionaire?
For a seven-figure TSP holder, a conversion often makes sense when a multi-decade model shows that intentionally crossing into a higher bracket in select years costs less than a lifetime of forced RMD income at the top rates. FERS or CSRS pension income, Social Security timing, and single-filer survivor brackets after one spouse dies all feed the sizing. This is where the “fill the bracket” default frequently works against a high-balance household.
Consider the survivor problem, which is rarely quantified. When one spouse dies, the survivor files as a single taxpayer. The 32% bracket that started at $403,550 of taxable income for a couple now starts at $201,775 for the survivor, and the IRMAA joint threshold of $218,000 drops to $109,000. A federal pension that continues to the survivor can fill those compressed brackets fast, so pre-paying tax at joint rates during both spouses’ lifetimes can be the lower-cost path.
A factor often overlooked in generic conversion advice is pension stacking. A FERS or CSRS annuity is guaranteed taxable income that arrives every year and cannot be converted. It occupies the lower brackets, so conversion dollars stack on top of it, not underneath. A household with a large pension has less low-bracket room, which changes both the amount and the years to convert. Integrating that pension floor, Social Security start age, and projected RMDs into one model is the core of the sizing work.
For TSP Millionaires, this can mean deliberately converting into the 32% or 35% bracket in a few targeted years to shrink the traditional balance enough that RMDs never force 37% income for decades. The cost is a higher bill in those specific years; the benefit is a smaller lifetime tax base. Deciding the figure is a modeling exercise, and our guides on how much to convert to Roth and the firm’s Roth conversion planning service show how the variables interact.
Common mistakes to avoid
Common TSP Roth conversion mistakes include treating the easy new mechanic as the whole decision, defaulting to the current-bracket cap without a multi-year model, forgetting that no tax is withheld, ignoring the two-year IRMAA lookback, and overlooking the single-filer survivor bracket. Each error is avoidable with a projection built around your own federal income sources.
- Treating easier execution as the strategy. The in-plan feature removes friction, not the sizing question.
- Defaulting to the current-bracket cap. For high-balance holders, this can be a costly default across a full retirement.
- Skipping the outside-tax check. Nothing is withheld, so many households plan the cash to pay the bill before converting.
- Ignoring the survivor transition. A surviving spouse files single, with compressed brackets and a lower IRMAA threshold.
- Converting an RMD. A required minimum distribution cannot be converted, and RMDs must be taken first in an RMD year.
- Treating it as one event. Most federal plans run several years and recalibrate annually.
Work with Q3 Advisors
Q3 Advisors is a registered investment adviser focused on retirement tax planning. This page is educational and is not advice; consult a qualified professional.
Frequently asked questions
Can I do a TSP Roth conversion while still employed?
Yes. Active federal employees can request a TSP in-plan Roth conversion while still working and contributing. The converted amount is taxable in that year and stacks on top of your salary, so working-year conversions often land in higher brackets than gap-year conversions after retirement. Many federal employees model both timing options before deciding when to convert.
Is there an income limit for a TSP Roth conversion?
No. A TSP Roth conversion has no income limit, unlike Roth contributions, which phase out (the 2026 Roth IRA contribution phase-out runs $153,000 to $168,000 single and $242,000 to $252,000 joint). Any federal employee or retiree with a traditional TSP balance can convert regardless of income. High earners are not excluded from converting, though their bracket affects the tax cost.
How many TSP Roth conversions can I do per year?
You can complete up to 26 TSP in-plan Roth conversions per year, with a $500 minimum for each conversion. That limit supports a laddered approach, converting in several smaller amounts across the year rather than one large event. Spreading conversions can help a household stay within a target bracket and manage the cash needed to pay the tax.
Do I pay a penalty on a TSP Roth conversion?
No. The conversion itself carries no 10% early-withdrawal penalty, even before age 59.5, because the money stays inside the plan. A penalty can apply only if you later withdraw converted principal before its own five-year mark and before 59.5, or if you pull TSP dollars to pay the conversion tax while under 59.5. The conversion is still taxable as ordinary income.
Can I convert my entire TSP balance to Roth?
Yes, a conversion is uncapped, but converting an entire large TSP balance in one year usually pushes the household into the top federal brackets (32% to 37% in 2026) and the highest IRMAA tier. Most optimized federal plans convert across several years instead. You cannot convert a required minimum distribution, so in an RMD year the RMD must come out first.
How much tax do you pay on a TSP Roth conversion?
You pay ordinary income tax on the full converted amount at your marginal rates for that year. The conversion stacks on your other income, so the rate depends on the brackets it fills, from 10% up to 37% in 2026. No tax is withheld, so you pay from outside funds, and the amount is due by December 31 of the conversion year.
