Roth in-plan conversions arrive for TSP, but consider tax implications first

Beginning Jan. 28, the Thrift Savings Plan now allows participants to convert traditional (pre-tax) balances into Roth (after-tax) balances inside the TSP itself. This long-awaited change gives federal employees and retirees more flexibility over how and when they pay taxes on retirement savings.

While the mechanics of the change are straightforward, the implications are not. A Roth in-plan conversion is a tax event and not just a retirement planning decision. Once it is made, it cannot be reversed. Knowing this beforehand helps you choose effective planning tools and avoid costly errors.

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