TSP In‑Plan Roth Conversions — Fine Woodworking Your Retirement

🦊 Welcome Back to the Foxhole

Rob and Omen open the episode with gratitude for a recent jump in listeners (thank you for sharing the show!) before diving into a timely and highly requested topic: TSP in‑plan Roth conversions. This is a practical, no‑nonsense conversation designed to help servicemembers and federal employees understand what’s now possible—and what to watch out for.

📅 This Week in History

Omen highlights the February 23, 1945 flag raising on Iwo Jima.

📰 Headline of the Week

“401(k) balances Rose 13% in 2025” (Michael Popke - Think Advisor)

Key points discussed:

• Average balances rose 13% to over $113,000
• Average contribution rate held steady at 7.2%

The real driver? Automation.

🧠 Main Topic: TSP In‑Plan Roth Conversions

The core of the episode focuses on what it means to convert traditional TSP dollars to Roth TSP inside the plan.

⚠️ For a full Roth conversion primer, see Episode 10.

Why this matters:

• You no longer have to wait until separation to convert
• Especially useful for servicemembers in historically low tax brackets
• Allows more flexibility and long‑term tax planning

💰 Taxes: The Reality

• Conversions are taxable income in the year completed

🚫 Do not withhold taxes from the conversion (especially under age 59½).

🧮 Know Your Tax Bracket

Rob and Omen encourage listeners to:

• Check Line 15 on Form 1040 (taxable income)
• Compare it to current tax brackets

🧰 Tools Mentioned

• Dinkytown Tax Calculator – quick, rough tax projections
• TSP Roth In‑Plan Conversion Calculator – more detailed, very powerful

🎯 Strategic Reasons to Convert

• Filling up a low tax bracket
• Using a refund intentionally
• Reducing future RMDs
• Converting during market downturns
• Building tax diversification (Roth + Traditional + Taxable)

📝 TSP Rules to Know

• Up to 26 in‑plan conversions per year (per account)
• Minimum conversion: $500
• Must leave $500 in tax‑deferred TSP (with limited exceptions)
• Expect a 1099‑R the following January

📣 Final Notes

Questions for the show? Email fiscalfoxhole@gmail.com.

• Read “Don’t over Roth Your Retirement”
• Book a meeting with Omen
• Book a meeting with Rob