TSP Roth In-Plan Conversion 2026: Complete Guide for Federal Employees

Update (September 9, 2026): Roth in-plan conversions have been live since January 28, 2026. Through April 30, FRTIB reported 26,439 participants had run 30,913 conversions totaling $683.8 million, with a median conversion of $9,932. February was the peak month at 10,925 transactions. TSP also shipped a public conversion calculator and a personalized one inside My Account. The section below adds a FedTools-computed conversion ladder that neither tool produces.

Starting January 28, 2026, federal employees can convert traditional TSP balances to Roth directly within the Thrift Savings Plan. No more rolling funds to an IRA first. This is the biggest TSP change since the Roth option launched in 2012.

But converting isn't right for everyone. The tax hit can be significant, and once you convert, there's no going back.

What Is a TSP Roth In-Plan Conversion?

A Roth in-plan conversion moves money from your traditional (pre-tax) TSP balance to your Roth (after-tax) TSP balance. The key word is "in-plan." You're converting within the TSP itself.

Before this feature, converting traditional TSP to Roth required three steps:

1. Roll traditional TSP out to a traditional IRA
2. Convert traditional IRA to Roth IRA
3. Keep track of it outside the TSP system

Now you can do it in one step, directly in My Account.

Why this matters: Roth balances grow tax-free. When you withdraw in retirement, you pay zero federal income tax on qualified distributions. If you expect to be in a higher tax bracket later, or you want tax diversification, Roth makes sense.

The $500 Holdback Rule

When you convert, you can't empty your traditional balance completely. TSP requires you to keep at least $500 in each traditional contribution source (employee contributions, agency automatic 1%, agency match).

This prevents accidental full conversions and gives you flexibility for future conversions.

26 Conversions Per Year

You can convert up to 26 times per calendar year, per account (civilian and uniformed services accounts count separately). This allows for "conversion laddering," spreading conversions across multiple years to manage your tax bracket.

Source: FRTIB board data as reported by FedSmith, May 28, 2026. Later reporting puts cumulative activity near 40,000 participants and close to $1 billion converted by midsummer; FRTIB had not published a dated release with those figures when this was updated.

The median tells the story. Most conversions are under $10,000, which means most participants are doing what the tax math rewards: filling a bracket a piece at a time, not converting a whole balance in one year.

The Conversion Ladder: How Many Years to Convert a Balance

The question the median points at is how much to convert each year. We computed it for a married GS-13 retiree with a $60,000 fully taxable FERS pension and no other income, using 2026 joint-filer brackets ($32,200 standard deduction; 12% bracket to $100,800 of taxable income; 22% to $211,400).

The pension alone leaves $27,800 of taxable income, already inside the 12% bracket. Two strategies:

• Fill the 12% bracket only. Room each year: $100,800 minus $27,800, or $73,000, taxed at 12%. Added tax: $8,760 a year.
• Fill through the top of the 22% bracket. Room each year: $183,600. The first $73,000 at 12% ($8,760) and the next $110,600 at 22% ($24,332). Added tax: $33,092 a year.

FedTools 2026 analysis based on 2026 IRS joint-filer brackets (Rev. Proc. 2025-32, as amended by the One Big Beautiful Bill Act) and a $60,000 fully taxable FERS pension with no other income. The final year of each ladder converts only the remainder at 12%. The model ignores state tax, IRMAA, growth on the unconverted balance, and Social Security, all of which change real-world numbers. Run your own pension, balance, and filing status through the TSP Roth Conversion Calculator.

Stopping at the top of the 22% bracket rather than pushing into 24% is the decision most retirees are actually making, and the table shows why: the faster ladder costs about 5.5 points more on every converted dollar. The faster ladder also means writing a $33,092 check to the IRS from savings in year one, because TSP withholds nothing on a conversion.

Who Should Consider Converting?

Converting makes sense in these situations:

Good candidates:

• You're in a lower tax bracket now than you expect in retirement
• You have a long time horizon (10+ years until withdrawal)
• You want tax diversification between traditional and Roth
• You can pay the tax bill from outside funds (not from the TSP itself)
• You want to reduce future RMDs (Roth TSP is exempt from required minimum distributions)

Think twice if:

• You're in your highest earning years (peak tax bracket)
• You're within 5 years of needing the money
• You'd have to sell TSP investments at a loss to pay taxes
• The conversion would push you into a higher Medicare premium bracket (IRMAA)
• You're already over age 73 and subject to RMDs (must take RMD before converting)

Tax Implications: What You'll Owe

This is where people get surprised. The converted amount is added to your taxable income for the year.

Important: TSP does not withhold taxes on conversions. You must pay from external funds. If you convert in Q1, you may need to make estimated tax payments to avoid underpayment penalties.

State Taxes Too

Don't forget state income tax. If you live in a state with income tax, the conversion is taxable there as well. A $50,000 conversion in California (9.3% bracket) adds another $4,650 to your tax bill.

Watch for IRMAA

Medicare premiums are income-based. If a large conversion pushes your modified adjusted gross income over $109,000 (single) or $218,000 (married filing jointly), you'll pay higher Medicare Part B and D premiums for up to two years.

The Five-Year Rule Explained

There are actually two five-year rules for Roth accounts. Both apply to TSP Roth conversions.

Rule 1: Tax-Free Earnings

To withdraw earnings tax-free, your Roth TSP must be open for at least five years. The clock starts January 1 of the year you first contributed to Roth TSP (or January 1 of your first conversion year, whichever is earlier).

If you've been making Roth TSP contributions since 2020, this clock is already satisfied.

Rule 2: Penalty-Free Converted Amounts

Each conversion has its own five-year clock for penalty-free withdrawals of the converted amount (not earnings).

Example:

• You convert $30,000 in January 2026
• The five-year clock for that $30,000 starts January 1, 2026
• You can withdraw that $30,000 penalty-free after January 1, 2031

If you withdraw the converted amount before five years (and before age 59 1/2), you'll owe a 10% early withdrawal penalty on the amount.

Important: This rule tracks each conversion separately. A conversion in 2027 has its own five-year clock starting January 1, 2027.

Step-by-Step: How to Convert in My Account

Conversions are done inside My Account on TSP.gov:

1. Log in to My Account at tsp.gov
2. Open the Roth Conversions section
3. Select the contribution sources to convert from
4. Enter the dollar amount (minimum $500)
5. Review the tax disclosure (no withholding reminder)
6. Confirm the conversion

TSP processes conversions within 1-2 business days. You'll see the funds move from traditional to Roth in your account.

Two official calculators now exist. TSP published a public Roth in-plan conversion calculator and a personalized version inside My Account that pulls your actual balances. Neither one models the bracket-fill ladder above or the two-year IRMAA lookback; the FedTools TSP Roth Conversion Calculator does both.

Do not confuse conversion with the mandatory Roth catch-up. Since January 1, 2026, participants who earned more than $150,000 in FICA wages the prior year must make catch-up contributions as Roth under SECURE 2.0. That is a contribution rule, not a conversion, and it does not touch your existing traditional balance. Our mandatory Roth catch-up guide covers it.

Conversion Strategies by Life Stage

Early Career (Under 40)

Strategy: Convert aggressively while in lower tax brackets.

You have 20+ years for tax-free growth. Even a $10,000 conversion at age 30 could be worth $40,000+ by retirement. The tax cost now is small compared to the benefit later.

Action: Max out Roth contributions ($24,500 in 2026), then consider converting additional traditional balances each year.

Mid-Career (40-55)

Strategy: Balance growth with tax management.

You're likely in higher earning years. Large conversions may not make sense. Instead, consider converting just enough to "fill up" your current tax bracket without jumping to the next one.

Action: Calculate how much room you have in your current bracket. Convert that amount each year.

Near Retirement (55+)

Strategy: Focus on tax diversification and RMD planning.

If you have mostly traditional TSP, converting some to Roth gives you flexibility. You can draw from Roth in years when you need to manage taxable income.

Action: Model your retirement income. Convert enough to reduce future RMDs without spiking current taxes.

Already Retired

Strategy: Convert in low-income years.

If you retire before Social Security or pension kicks in, those "gap years" may be perfect for conversions. Your taxable income is lower, so conversions cost less.

Action: Work with a tax professional to identify optimal conversion years.

Common Mistakes to Avoid

1. Converting too much at once

A $200,000 conversion sounds efficient, but it could push you into the 32% or 35% bracket. Spread conversions over multiple years to stay in lower brackets.

2. Paying taxes from the TSP itself

If you're under 59 1/2 and withdraw TSP funds to pay the tax bill, you'll owe the 10% early withdrawal penalty on that amount. Always pay conversion taxes from external funds.

3. Forgetting state taxes

Your federal tax bracket isn't the whole picture. Add state income tax to your conversion cost calculation.

4. Converting when you need the money soon

Each conversion has a five-year clock. If you might need those funds within five years, conversion may not make sense.

5. Not taking RMD first

If you're over 73 and subject to required minimum distributions, you must take your annual RMD before doing any conversions. You cannot convert your RMD amount.

6. Ignoring Medicare IRMAA

A large conversion can trigger higher Medicare premiums for two years. Factor this into your cost analysis.

Model Your Conversion Ladder

Use our free TSP Roth Conversion Calculator to price a conversion against your own bracket, see the IRMAA exposure two years out, and build a multi-year ladder from your actual balance. Run your conversion →

For the long-term growth side, the TSP Calculator compares traditional-only against a traditional-and-Roth mix.

Frequently Asked Questions

What is a TSP Roth in-plan conversion?

It's a new feature starting January 28, 2026 that lets you convert money from your traditional (pre-tax) TSP balance to your Roth (after-tax) TSP balance directly within the plan. No IRA rollover required.

Who is eligible for TSP Roth in-plan conversions?

Active federal employees, uniformed services members, separated/retired participants, and spousal beneficiaries with at least $500 vested traditional balance. Non-spouse beneficiaries are not eligible.

How much can I convert from traditional TSP to Roth?

Minimum $500 per conversion, with up to 26 conversions per year per account. You must maintain a $500 "holdback" in each traditional contribution source.

What are the tax implications of a TSP Roth conversion?

The converted amount becomes taxable income for that year. TSP does not withhold taxes, so you must pay from external funds. You may need to make quarterly estimated tax payments.

Can I undo a TSP Roth conversion?

No. Once processed, Roth in-plan conversions are irrevocable and cannot be reversed.

What is the five-year rule for TSP Roth conversions?

Two rules apply: (1) For tax-free earnings, 5 years from your first Roth contribution; (2) For penalty-free withdrawal of converted amounts, each conversion starts its own 5-year clock from January 1 of the conversion year.

What if I have mutual fund window investments?

You cannot directly convert mutual fund window money. First sell shares and transfer funds back to TSP core funds, then request a Roth in-plan conversion.

How many people have used TSP Roth in-plan conversions so far?

Through April 30, 2026, FRTIB reported 26,439 participants had made 30,913 conversions totaling $683.8 million, with a median conversion of $9,932. February 2026 was the busiest month. Later reporting puts the cumulative total near 40,000 participants and close to $1 billion by midsummer.

How much should I convert each year?

Enough to fill the tax bracket you are already in without crossing into the next one. For a married retiree with a $60,000 FERS pension and no other income, that is about $73,000 a year to stay inside the 12% bracket, or about $183,600 a year to fill through the 22% bracket. A $400,000 balance takes six years the first way and three years the second, at 12% versus 17.5% average tax.

Is the mandatory Roth catch-up the same as a Roth conversion?

No. Since January 1, 2026, participants who earned more than $150,000 in FICA wages the prior year must make catch-up contributions as Roth under SECURE 2.0. That rule applies to new contributions only. A conversion moves money you already have in traditional TSP to Roth, and it is always your choice.

Related Resources

• TSP Guide 2026: Complete guide to the Thrift Savings Plan
• TSP Roth Conversion Calculator: Bracket-fill, IRMAA, and multi-year ladder modeling
• TSP Calculator: Model your TSP growth and withdrawal strategy
• FERS Retirement Calculator: Estimate your federal pension
• TSP 2025 Performance Review: How TSP funds performed last year

Sources

• TSP Bulletin 25-4: Roth in-plan conversions
• TSP: Roth in-plan conversion calculator
• TSP: Contribution limits 2026
• FedSmith: FRTIB Roth in-plan conversion participation data (May 28, 2026)
• TSP.gov: Roth In-Plan Conversions
• TSP.gov: SECURE 2.0 and the TSP
• Federal Register: Roth In-Plan Conversions Final Rule (Oct 2025)
• Federal News Network: Understanding the 2026 Roth and TSP Changes