Craig Wear, CFP®Craig Wear, CFP® | Expert in Roth Conversions & Tax-Efficient Retirement Strategies for IRA Millionaires

All Federal Employees Need to Know This (Save Millions on Taxes)

3 Jul 2026 · 1 min

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In this video, CFP® Craig Wear explains the Thrift Savings Plan’s (TSP) new in‑plan Roth conversion feature, which lets federal employees move money directly from the traditional TSP side to the Roth side. He outlines why this option gives employees more control over future taxes compared to previous work‑arounds that involved complex withdrawals, rollovers, and tax‑reporting issues. Wear walks through the exact steps: logging into the TSP My Account portal, requesting a Roth conversion, and selecting the amount. He emphasizes that the conversion amount is taxed in the year of conversion, that taxes are not automatically withheld, and that participants should have outside funds ready to cover the tax bill. He warns that choosing an inappropriate conversion amount without sufficient funds can lead to higher tax liabilities or penalties, urging careful planning.

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This new option gives federal employees far more control over their future tax situation than they've ever had before. Before, if you wanted to build a Roth strategy using TSP dollars, you had to work around the plan instead of through it. There were withdrawal rules, there were rollover logistics, there was tax reporting complications and plenty of opportunities for mistake. But handled incorrectly, those mistakes could create unnecessary tax withholding issues and even penalties. But they've made some changes and now there's a much simpler option for you. You can move money directly from the traditional side of your TSP into the Roth side of your TSP. It's called an in-plan Roth conversion. So look, here's how it works. You log into your TSP My Account portal, you request a Roth in-plan conversion, you choose the amount you'd like to convert, and that's it. The money stays inside the TSP, but the tax treatment changes. You're going to pay taxes on the amount that you converted that day, but that money is no longer sitting in your traditional TSP creating future RMDs. Now here's one important note. Taxes are not automatically withheld from the conversion. Itself. So ideally, you want outside money available to pay the tax bill. And if you don't have that, you want to be much more careful before doing the conversions because the wrong conversion amount could actually create a worse outcome.