TSP Lets You Convert Traditional Money to Roth In-Plan

Since January 28, 2026, TSP lets you convert traditional balance dollars to Roth without rolling the money out to an IRA first. TSP announced the change in Bulletin 25-4, and the mechanics carry a few specific limits worth knowing before you request one.

What Changed on January 28, 2026

Before this date, moving traditional TSP money into a Roth account required a rollover to an outside IRA, a Roth conversion inside that IRA, and, for anyone who wanted the money back inside TSP, no way to bring it back in at all. TSP's new in-plan conversion skips the outside account entirely. You request the conversion directly through your account at tsp.gov, and the money moves from your traditional balance to your Roth balance inside the same TSP account.

If you have never held a Roth TSP balance before, your first conversion creates one automatically. You do not need to open a separate Roth election first.

Who Can Use It

Active and separated TSP participants can convert, and that includes uniformed services members alongside civilian federal employees. Spousal beneficiaries of a TSP account can convert too. Non-spouse beneficiaries, such as an adult child who inherits a TSP account, cannot use this feature.

The $500 Minimum and the 26-Conversion Annual Cap

Each conversion request has to be at least $500. You choose the amount as a specific dollar figure or as a percentage of your eligible traditional balance, and TSP caps you at 26 conversions in a single calendar year, roughly one every two weeks if you wanted to spread a large conversion out that far.

Spreading a large conversion across several smaller ones, rather than converting the full amount at once, can help manage the tax bill each conversion creates, since the timing of each request is entirely up to you within that 26-conversion ceiling.

You Cannot Convert Every Dollar

TSP requires you to leave at least $500 behind in each of four balance categories after a conversion: your tax-deferred employee contributions, your tax-exempt contributions, your agency automatic contributions, and your agency matching contributions. That hold-back applies separately to each category, not once across your whole account. A spousal beneficiary account is not subject to the hold-back, and money you rolled into TSP from an outside retirement plan is not either.

Practically, this means a full zero-out of your traditional balance is not possible while any of those four categories still holds money. Plan your conversion amount around that floor rather than assuming you can convert down to a clean $0.

No Withholding Means a Tax Bill You Have to Plan for Yourself

TSP does not withhold any tax on the amount you convert, unlike a standard TSP withdrawal, which carries a mandatory 20% federal withholding. The full converted amount counts as ordinary taxable income for that year at your marginal tax rate, and TSP sends you the entire amount with nothing held back for the IRS.

That gap between "no withholding" and "fully taxable" is where a first-time conversion catches people off guard. A $20,000 conversion at a 22% marginal rate creates roughly $4,400 in tax owed, and none of that comes out automatically the way it would from a regular withdrawal. Set aside the estimated tax yourself, or make a quarterly estimated payment to the IRS, before the bill shows up at filing time.

Every Conversion Starts Its Own Five-Year Penalty Clock

Each Roth in-plan conversion opens a separate five-year clock, running from January 1 of the year you convert, that governs whether a 10% early-withdrawal penalty applies to that specific converted amount. Withdraw converted principal before its own five years are up, and before age 59 1/2, and that portion owes the 10% penalty even though the money already sat inside your Roth TSP balance. A conversion made in January 2026 clears its own penalty clock on January 1, 2031. A second conversion made in 2027 clears on January 1, 2032, entirely separate from the first.

This runs alongside a second, different five-year rule that applies once, at the account level, to whether your Roth TSP earnings come out tax-free at all. Converting in one lump sum versus several smaller conversions across different years does not change the tax you owe today, but it does change when each portion clears its own penalty-free withdrawal date. Someone planning to tap converted money within five years should convert earlier rather than later, since a conversion made today clears its clock five years sooner than the same conversion made three years from now.

A TSP Conversion Does Not Touch a Separate Roth IRA

A Roth TSP balance and a Roth IRA are two separate accounts with two separate five-year clocks, even if you hold both. Converting traditional TSP money in-plan starts a clock on that conversion inside TSP alone. It has no effect on a Roth IRA you opened years ago, and it does not restart, extend, or otherwise touch that account's own five-year clock. Someone who already cleared the five-year mark on a long-held Roth IRA gains nothing from that history when a brand-new TSP conversion opens its own separate clock the same year.

This distinction matters most for anyone planning to draw down converted money soon after converting it. Check which account, and which conversion inside that account, actually holds the dollars you plan to spend, rather than assuming a Roth IRA's older age carries over to a newer TSP conversion.

Why This Differs from Choosing Roth TSP Contributions Going Forward

Converting an existing balance is a different decision from choosing Roth for your future paycheck contributions. Rank and Pay's Roth vs Traditional TSP guide covers which bucket new contributions should go into. A conversion only touches money already sitting in your traditional balance, and it creates an immediate tax bill this year rather than spreading the choice across future paychecks the way a contribution election does.

Who This Is Not For

Converting a large traditional balance in a high-earning year usually pushes you into a higher tax bracket than necessary, since the entire converted amount stacks on top of your regular income for that year. This feature also is not a fit if you cannot cover the resulting tax bill from money outside TSP, since paying the tax out of the conversion itself defeats much of the benefit by shrinking what actually lands in your Roth balance.

What Would Change This Answer

A year with unusually low income, a gap between separating from service and starting a civilian job, or a year with heavy deductions changes the math in favor of converting, since the same dollar amount costs less tax at a lower bracket. Approaching retirement age and expecting required minimum distributions later also favors converting sooner, since Roth TSP balances have been exempt from RMDs since 2024. A near-term need for that same money works against converting, since Roth TSP earnings generally need five years and age 59 1/2 to come out tax-free.

Check your current tax bracket before requesting a conversion, and confirm the exact hold-back amounts left in each balance category on your TSP account summary first. See Roth vs Traditional TSP for the contribution-type decision, or review TSP withdrawal strategies for how a Roth balance gets taxed once you actually take it out.

This page is general information, not legal or financial advice. Verify current conversion rules and limits directly on tsp.gov or with a qualified tax professional before acting.