Roth TSP vs. Traditional TSP: Which Is Right for You?

By Alec Sunners, CFP®

If you’ve contributed to the Thrift Savings Plan for most of your career, there’s a chance nobody ever asked whether Traditional or Roth was the better fit for your situation. Automatic enrollment picked a default and the money went where it went. Now you’re a few years from retirement, and the answer determines when you pay taxes on a balance that took decades to build. It’s one of the first things we look at with federal employees and military members in retirement and tax planning.

Here’s how to think through the choice.

The Difference Comes Down to When You Pay Taxes

Traditional TSP contributions come out of your paycheck before taxes, which lowers your taxable income today, meaning you pay ordinary income tax on every dollar when you withdraw it in retirement. Roth contributions work in reverse: you contribute after-tax dollars today, and your qualified withdrawals, including all the investment growth, come out completely tax-free later.

Your agency or service matching contributions always go into your Traditional balance, regardless of how you direct your own personal contributions. This means if you contribute exclusively to the Roth option for a decade, you still accumulate a growing pre-tax balance from your agency matches, turning the choice into a balancing act of proportions rather than an all-or-nothing decision.

	Traditional TSP	Roth TSP
Contributions	Pre-tax (lowers your taxable income now)	After-tax (no tax break now)
Withdrawals in retirement	Taxed as ordinary income	Tax-free if qualified
Agency/service match	Goes here regardless of your election	Does not receive match directly
Required minimum distributions	Begin at age 73 or 75 (by birth year)	Not required since 2024
In-plan Roth conversion	Can convert to Roth inside the TSP (Jan. 2026)	Receiving side of conversion
Catch-up rule for high earners (2026)	Available if wages were under $150K	Required if prior-year wages topped $150K

The Tax Backdrop Changed in 2025

Up until last year, there was a built-in reason to favor Roth contributions. The 2017 tax cuts had an expiration date, rates were going back up on their own in 2026, and the math said pay the tax now while rates are low. 

That’s no longer true. The One Big Beautiful Bill Act, signed in July 2025, made the current individual rates permanent starting with the 2026 tax year. They won’t expire on a schedule, though Congress can still change them later.

So the comparison is simpler now: your rate today versus your expected rate after you retire. For a lot of career federal employees, the retirement number may be higher than they think. A FERS pension, Social Security, and required withdrawals from a Traditional balance can all show up as taxable income in the same year, and that pushes tax brackets up. Sorting through those numbers is exactly the kind of work our CPAs and advisors do together.

When Traditional TSP Tends to Make Sense

Traditional contributions generally favor people whose current tax rate is higher than the rate they expect to pay in retirement. If you’re currently in your peak earning years, especially with a high federal locality pay adjustment, and anticipate your income dropping after you leave government service, deferring taxes today provides a distinct financial advantage. 

However, as noted earlier, federal retirement income often runs steadier and higher than people assume. Test that assumption about a lower future tax bracket before building your entire strategy around it. 

When Roth TSP Tends to Make Sense

Roth contributions are ideal for people who anticipate their tax rate in retirement to be higher than or equal to what they pay today. They’re also a smart choice if you want money to spend later in life without increasing your taxable income for that year. 

That kind of flexibility becomes especially valuable once you reach the age for mandatory retirement account withdrawals and face higher Medicare premiums, since both of those costs are based entirely on your reported income.

In addition, one specific rule may have already made this choice for you. Starting in 2026, if you’re 50 or older and your salary from the previous year was above $150,000, your extra “catch-up” contributions must go into a Roth account. Roth accounts don’t force you to take mandatory yearly withdrawals once you reach a certain age, giving your money even more room to grow.

The Window Between Retirement and Your First Required Withdrawal

The years between your retirement date and your first mandatory withdrawal are often the lowest-income years of your adult life, and that gap can last for a decade or longer.

Mandatory withdrawals from your Traditional TSP begin at age 73 if you were born between 1951 and 1959, and at age 75 if you were born in 1960 or later. If you’re still in federal service, those withdrawals don’t apply yet. Your first one isn’t due until April 1 of the year after you reach the applicable age and leave government employment, whichever comes later.

Once you separate, that’s when the window opens. Your government salary stops, you may not have started collecting Social Security yet, and mandatory withdrawals from your Traditional balance may not have kicked in.

Since January 28, 2026, the TSP has permitted Roth in-plan conversions, allowing you to transfer money from a Traditional balance to a Roth balance directly within the plan without rolling it out to an IRA first.

You owe ordinary income tax on the amount converted in that tax year. You must pay that tax from outside sources rather than the converted funds, and once completed, the conversion cannot be reversed.

Aligning these conversions with those low-income years is one of the most effective strategies available in retirement tax planning.

Where to Start

The right mix depends on your current bracket, your projected retirement income, your birth year, and how long the money stays invested. 

Before anyone becomes a client, we walk through a Financial Physical®, a review of your plan and taxes that shows where you stand and what’s still open to you.

If you’re within five years of retirement, this is a good time to pressure-test the assumptions behind your TSP elections. 

You can reach me and our team at (410) 823-7283 or by scheduling an introductory call.

Frequently Asked Questions About Roth and Traditional TSP

Can you contribute to both Roth and Traditional TSP at the same time?

Yes. You can split contributions between both in any proportion and change that split at any time. The combined total counts against one annual limit, $24,500 for 2026, plus catch-up contributions if you’re 50 or older. Many federal employees carry both balances into retirement for tax flexibility.

Does the government match go into my Roth TSP?

No. Agency and service matching contributions always go into your Traditional (pre-tax) balance, even when every dollar of your own contributions is Roth. You’ll owe ordinary income tax on that portion when you withdraw it, which means a Roth-only contributor still builds a taxable balance over a career.

When do required minimum distributions start for a Traditional TSP?

Required minimum distributions from a Traditional TSP balance begin at:

• Age 73 if you were born between 1951 and 1959
• Age 75 if you were born in 1960 or later

Roth balances inside the TSP haven’t been subject to required distributions since 2024, so they don’t factor into that calculation.

Can I convert my Traditional TSP to Roth without leaving the plan?

Yes. Since January 28, 2026, the TSP has allowed Roth in-plan conversions, which move money from your Traditional balance to Roth inside your account. The converted amount counts as taxable income that year and the transaction is irreversible. Financial Consulate models the tax cost of a conversion before a client commits to an amount.

Do high earners have to make Roth catch-up contributions to the TSP?

Yes, starting in 2026. If your prior-year wages from TSP-eligible positions were above $150,000, catch-up contributions at 50 and older must be designated as Roth. The TSP redirects them automatically once you reach the annual elective deferral limit, so the change happens without action from you.

About Alec

Alec Sunners, CFP®, is a Wealth Advisor at Financial Consulate, where he works directly with clients to help them navigate the financial and tax decisions that come with approaching and entering retirement. He also supports the investment team by researching funds and assessing the firm’s portfolios.