Financial Readiness
A new 2026 feature lets you move traditional TSP money into Roth, but you pay the tax now, so know the rules before you convert.
U.S. Air National Guard photo by Airman 1st Class Jonathan W. Padish, Hulman Field, Indiana, DVIDS (public domain)
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Starting in 2026, the Thrift Savings Plan lets you move money from your traditional (pre-tax) balance into your Roth (after-tax) balance without leaving the plan. It is called a Roth in-plan conversion. The catch: the amount you convert counts as taxable income for that year, and the TSP does not withhold the tax for you, so plan to cover it from other money. Conversions are irrevocable, and the TSP recommends talking to a tax advisor first.
Source: Thrift Savings Plan
It is a way to turn traditional TSP dollars into Roth TSP dollars inside your existing account. Before 2026, the only way to build a Roth balance was to contribute new Roth pay or roll in outside Roth funds. As of late January 2026, participants and spousal beneficiaries can convert an existing traditional balance to Roth directly in My Account.
Traditional TSP money is pre-tax: you did not pay income tax when it went in, so you pay tax when it comes out. Roth TSP money is the reverse: you already paid tax, so qualified withdrawals in retirement come out tax-free. A conversion moves money from the first bucket to the second, and the government collects the income tax on the way.
Source: Thrift Savings Plan
Active and separated participants with a total eligible vested balance of at least $500 can request a conversion. You also keep at least $500 (a "leave behind amount") in each non-Roth payroll source, such as your Traditional, tax-exempt, Automatic 1%, and Agency or Service Match sources, so the plan can handle any later payroll corrections. Spousal beneficiaries need a $500 balance and are not subject to the leave behind amount.
No income limit applies to a TSP Roth in-plan conversion. Unlike a Roth IRA, where higher earners get phased out, a participant with an eligible traditional balance can convert regardless of income.
Source: Thrift Savings Plan
The amount you convert is added to your taxable income for the year and taxed at your income tax rate. The TSP issues a Form 1099-R the following January showing the conversion, and it does not withhold taxes from the converted amount, so plan to pay the tax from other funds, not from the money that moved. Converting in a year when your taxable income is lower, for example a year with months of tax-exempt combat zone pay, can mean a smaller tax bill on the same conversion.
Source: Thrift Savings Plan
The common reason is tax timing. If you expect to be in a higher tax bracket later, paying tax now at a lower rate can leave more of your retirement money growing tax-free. Junior enlisted years, deployment years with the combat zone tax exclusion, and other low-income years are when your rate may be at its lowest. Converting some traditional balance in those years locks in today's rate. This is a personal call that depends on your bracket now versus later, which is why the TSP recommends talking to a tax advisor before you convert.
Source: Thrift Savings Plan
A few rules to know:
Source: Thrift Savings Plan
Can I undo a TSP Roth conversion if I change my mind?
No. Roth in-plan conversions are irrevocable once processed, per IRS rules, so treat the decision as final and size it to what you can cover in taxes.
Does converting cost me anything up front?
There is no fee to convert, but the converted amount is added to your taxable income for the year, and the TSP does not withhold the tax, so plan to pay it from other money.
Is there an income limit like there is for a Roth IRA?
No income limit applies to a TSP Roth in-plan conversion. A participant with an eligible traditional balance can convert regardless of income.
How many times can I convert in a year?
Up to 26 conversions per account per calendar year, with a $500 minimum each.
Does a conversion change my regular TSP contributions or match?
No. A conversion only moves existing balances. Your contribution elections, your annual contribution limit, and your match continue as before.
What tax form do I get?
The TSP issues a Form 1099-R the following January for the conversion, with a distribution code of G. The conversion does not affect your W-2.
Should I convert my combat zone tax-exempt contributions?
Tax-exempt traditional contributions are a special case, and the mechanics differ by source, so this is a good question for a tax advisor and the TSP before you act. In general, converting during a low-income or tax-exempt year can reduce the tax hit, but the right move depends on your full picture.
VetraFi does not provide financial, investment, tax, legal, or accounting advice. The content provided is for informational purposes only. You should consult your own advisors before engaging in any transaction.
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