The Thrift Savings Plan (TSP) will offer participants the option to convert their traditional investments to Roth status starting in 2026. Officials announced this change at the November meeting of the TSP’s governing board. Traditional investing involves pre-tax contributions, with the principal and earnings being taxable upon withdrawal.
Roth investing, on the other hand, involves after-tax contributions, and both the principal and earnings are tax-free upon withdrawal if certain conditions are met. Roth balances are also not subject to required minimum distributions, which retirees must start taking from traditional balances at age 73. While individual investors can choose between traditional and Roth investments for their personal contributions, agency contributions for FERS employees and military personnel are exclusively in traditional status.
TSP Roth conversion starting 2026
To convert to a Roth balance, an investor would have to pay taxes on the conversion, similar to taxes on a regular withdrawal. These taxes cannot be paid using TSP assets.
A recent participant survey revealed that 24 percent of respondents understood Roth conversion and its tax implications, while 35 percent stated they would likely or extremely likely use a Roth conversion feature if offered. As of the end of October, the TSP had $947 billion in investments, with $68 billion in Roth status. Out of nearly 7.2 million accounts held by current and former federal and military personnel, 2.7 million have money in Roth status.
This includes 1.1 million of the more than 4.1 million accounts belonging to current or former employees under FERS, with the average Roth balance being about $32,000 out of a total average balance of about $192,000.
Noah Nguyen is a multi-talented developer who brings a unique perspective to his craft. Initially a creative writing professor, he turned to Dev work for the ability to work remotely. He now lives in Seattle, spending time hiking and drinking craft beer with his fiancee.
