New TSP Proposal

[VJoe571]

I just read this on the TSPTalk.com website.

A new proposal would allow you to easily convert your TSP balance to a Roth.

Would you do it?

Pros vs Cons?

Learning as I go.

[Aitrus]

Haven't been over to TSPTalk in a long, long time. However, I did read this article last week. I'm glad that TSP Board is thinking about offering it - more options is a good thing. Rarely does one size fit all.

https://www.fedsmith.com/2025/10/15/frt ... -proposal/

As for whether or not I would to it? I'm not sure. The pros and cons are about even for me in my financial situation and tax bracket.

[jimcasada]

I've already been converting over via Schwab Roth at about $80k/yr. Why would I want to do this via TSP when my Schwab account gives me much greater control over my money with 1000's of investment choices?

[Bubba]

I've already been converting over via Schwab Roth at about $80k/yr. Why would I want to do this via TSP when my Schwab account gives me much greater control over my money with 1000's of investment choices?

Good point. I had thought of doing that with my Fidelity account...but I've chickened out doing something like this. Are you retired that you do not care or are you still in service?

Also, I'm heavily looking forward to converting a bunch every year. It'll make a big difference in my situation later.

I really wish we had the mega option...but I do appreciate this first step.

https://www.fidelity.com/learning-cente ... kdoor-roth

[jimcasada]

I've been fully retired for 3 years now. Never did Roth while I was still working. Now, I'm trying to rollover as much as I can without going into the next higher tax bracket, while I can still claim these two college kids as dependents.

[SurelyJame]

This was announced in 2024. Just FYI.
https://www.fedweek.com/fedweek/tsp-to- ... s-in-2026/

[Rfh]

I'm waiting to see whether they change the rules of reallocation for next year(not holding my breath). If you're going to convert from regular tsp to Roth tsp presumably you'd want the Roth to have a more aggressive allocation. But if as currently set up, you have to move things proportionally, then you can't make it more aggressive than traditional tsp. In the meantime I set up a rollover Ira and rollover Roth Ira and moves some non federal funds into it. If they don't change the allocation rules for tsp next year I'm considering to move my current Roth tsp to the rollover and do conversions in the rollover Roth Ira.

[IRQVET]

You can, just gotta pay tax at the end of the year on whatever you convert. I've been heavy into the ROTH since its inception, so I wouldn't benefit from the transfer but for others I can see the value.

2 years my tax lady said I was flirting with the next tax bracket, suggested that I switch my TSP contributions less ROTH and more traditional TSP to lower my taxable income.

[Bubba]

I'm waiting to see whether they change the rules of reallocation for next year(not holding my breath). If you're going to convert from regular tsp to Roth tsp presumably you'd want the Roth to have a more aggressive allocation. But if as currently set up, you have to move things proportionally, then you can't make it more aggressive than traditional tsp. In the meantime I set up a rollover Ira and rollover Roth Ira and moves some non federal funds into it. If they don't change the allocation rules for tsp next year I'm considering to move my current Roth tsp to the rollover and do conversions in the rollover Roth Ira.

Yeah, i think this has frustrated many others on the board too. I've never moved anything out, because now with the MFW things have become much more interesting...but I get your point.

[evilanne]

Last year I did both IRA conversions and 401K In Plan Conversions. If you are still are still working and contributing to a Roth, the IRA conversions do not count against you on the income limit to be able to contribute to a Roth but the In-Plan conversions do, i.e. it counts as income. (Found this out when one of the IRA 1099-Rs was not coded correctly and TurboTax said I had exceeded the income limit and needed to withdraw a certain amount). Be careful with In-Plan conversion if you are still working and contributing to Roth, especially if your earnings are close to the income phase out.