TSP Roth In-Plan Conversion: Is Converting Right for You?

A TSP Roth in-plan conversion lets you move money from the traditional (pre-tax) side of your Thrift Savings Plan account to the Roth (after-tax) side without leaving the TSP. The trade-off is simple to state and harder to judge: you pay income tax on the converted amount this year in exchange for the chance at tax-free growth and withdrawals later. Whether that trade makes sense depends on your tax rate now versus later, whether you can pay the tax from other savings, and how long the money can stay invested.

The feature is new for federal employees, retirees, and uniformed services members, and it comes with rules that are easy to miss. This guide explains how conversions work, what they cost, and the questions to work through before you make a decision that cannot be undone. It is general education, not tax advice for your situation.

What a TSP Roth in-plan conversion is

The Federal Retirement Thrift Investment Board, which runs the TSP, published its final rule on Roth in-plan conversions in the Federal Register on January 15, 2026, and the rule took effect January 28, 2026. Before this, the only way to build a Roth TSP balance was to make Roth payroll contributions. Now you can also convert money you already have in your traditional balance.

According to the TSP's Roth in-plan conversions page, you can convert during your working years and in retirement, as long as your traditional balance meets the eligibility requirements. If you do not already have a Roth TSP balance, your first conversion creates one.

Who can convert

The TSP says conversions are available to:

• Active participants, including current federal civilian employees and uniformed services members.
• Separated and retired participants.
• Spouse beneficiary participants.

Non-spouse beneficiaries are not eligible. Income limits do not apply, so your eligibility does not depend on how much you earn.

The rules to know before you convert

The TSP has set out a handful of mechanical rules. None are complicated on their own, but together they shape how and when a conversion can happen.

• Minimum amount. Each conversion must be at least $500.
• Leave-behind amount. At least $500 must remain in each of your payroll sources after the conversion: your own traditional contributions, tax-exempt combat zone contributions, agency matching contributions, and vested agency automatic (1 percent) contributions. Traditional rollover money has no leave-behind requirement.
• Proportional sourcing. The money comes proportionally from your eligible sources. You do not pick which source to convert.
• Up to 26 per year. You can make up to 26 conversions per calendar year, per TSP account. Each is a separate request. Automatic or recurring conversions are not available.
• No spousal consent. Your spouse does not need to sign off.
• RMDs first. If you are subject to required minimum distributions, you must take the year's RMD before you can convert.
• TSP funds only. Money in the mutual fund window must be moved back into TSP funds before it can be converted.
• No reversal. Once a conversion is done, it cannot be reversed or changed.

There is no TSP fee to convert. For uniformed services members with tax-exempt combat zone money, the IRS requires that conversions include taxable and nontaxable money in the same proportion as your traditional balance.

How taxes work on a conversion

This is the part that deserves the most attention. The amount you convert from pre-tax money is added to your taxable income for the year. A large conversion can push part of your income into a higher marginal tax bracket.

The TSP is clear about three practical points:

1. 01No withholding is possible. Because the money never leaves your account, the TSP cannot withhold tax from a conversion. You must pay the tax with personal funds from another source, such as a savings account.
2. 02You may owe estimated payments. Because nothing is withheld, you may need to make estimated tax payments to avoid underpayment penalties.
3. 03It shows up on Form 1099-R. The TSP reports your total conversions for the year to the IRS, to state tax agencies where applicable, and to you.

Extra taxable income can also affect other parts of your finances that depend on income, so it helps to look at the whole picture before choosing a conversion amount. The TSP offers a Roth in-plan conversion calculator, including a personalized version in My Account that uses your actual account data, and it strongly recommends talking to a tax advisor before you convert.

The two five-year rules

Roth money has two separate five-year clocks, and conversions can make them confusing.

Five-year rule for Roth earnings

Earnings in your Roth TSP balance can be withdrawn tax-free once they are qualified. That requires both of these: five years have passed since January 1 of the year you made your first Roth TSP contribution (or your first conversion, if that is what created your Roth balance), and you have reached age 59½, become permanently disabled, or died.

Five-year rule for converted amounts

Each conversion starts its own five-year clock beginning January 1 of the year of that conversion. If you withdraw converted money within five years, you owe a 10 percent early withdrawal penalty tax unless an exception applies, such as being 59½ or older.

The TSP sums it up this way: if you are 59½ or older and your Roth TSP balance is at least five years old, both rules are satisfied.

Is a TSP Roth in-plan conversion right for you?

The TSP frames the decision around a short list of questions. A conversion might be right for you if you can answer yes to these:

• Will you be able to pay the tax now from personal funds?
• Do you expect your tax rate to be higher in the future?
• Will you keep the converted money invested for at least five years, or does an exception to the 10 percent penalty apply to you?

A conversion might not be right for you if you answer yes to these:

• Do you expect your tax rate to be lower in the future?
• Would paying the tax now be a hardship?
• Will you need to withdraw the converted money within five years?
• Could you make Roth payroll contributions directly instead?

Situations worth a closer look

Every household is different, but a few common federal situations tend to prompt the question.

• Early-career employees may be in a lower bracket now than they expect to be later. For many, simply choosing Roth for new payroll contributions may accomplish the same goal without a tax bill on existing savings.
• People with a low-income year, such as the gap between retiring and starting other income, sometimes look at converting smaller amounts across several years to manage the bracket effect. The 26-per-year limit gives room to spread conversions out.
• Retirees taking RMDs need to take the year's RMD first, and should consider how conversion income stacks on top of a pension, Social Security, and the RMD itself.
• Those focused on legacy may weigh how a Roth balance could affect what heirs inherit, and should coordinate with an estate plan.

None of these is a recommendation. They are prompts for a conversation with a tax professional who can see your full return.

If you receive installment payments

If you already receive TSP installments, your next payment after a conversion might include Roth money, including money you just converted. The TSP lets you choose whether installments come from your traditional balance first or your Roth balance first. To change that choice, you stop your current installments and start a new installment request in My Account or through the ThriftLine.

Questions to settle before you click convert

Because a conversion is permanent and has an immediate tax effect, write down your answers to these before you start:

1. 01How much taxable income will this add this year, and what bracket does that put me in?
2. 02Where exactly will the tax money come from, and when will I pay it?
3. 03Will I need any of this money within five years?
4. 04Would smaller conversions over several years make more sense than one large one?
5. 05How does this fit with my pension, Social Security, and expected spending in retirement?

If the tax payment would come out of your emergency fund, it may be worth strengthening your cash cushion first. Our guide to reducing expenses and budget guide can help.

Where this fits in your plan

A conversion is one tool for managing taxes across your lifetime, not a goal on its own. It works best when it fits a clear picture of your retirement income. The Federal Retirement Blueprint looks at your TSP, pension, and Social Security together, and the 10-step roadmap covers how protecting and growing your TSP fits your broader plan. For the full regulatory text, see the Federal Register final rule.