For tax year 2026, new rules require certain high-earning federal employees to make their Thrift Savings Plan (TSP) catch-up contributions into a Roth account.
What Federal Employees Need to Know about Mandatory Roth TSP Contributions
Under the SECURE 2.0 Act, certain federal workers are now required to make their TSP catch‑up contributions as Roth contributions rather than Traditional. This shift has big implications for taxes, retirement planning, and long‑term strategy. Federal employees earning above the threshold of $150,000 per year should understand the rules now before the end of the tax year.
Roth TSP vs. Roth IRA: the Basics
The Thrift Savings Plan functions much like a private‑sector 401(k), allowing you to save and invest for your future with extremely low fees and straightforward investment options. With both Roth TSPs and Roth IRAs, it’s about tax classification. Traditional contributions are made pre‑tax, lowering your taxable income for the tax year they are made, but you then have to pay taxes on withdrawals in retirement. A Roth TSP contribution flips that equation: you pay taxes upfront, but your qualified withdrawals in retirement are completely tax‑free.
This difference becomes especially important when planning for long‑term tax efficiency. Many federal employees choose to make traditional contributions because they reduce taxable income immediately. But for workers who expect to be in a similar or higher tax bracket in retirement, Roth contributions can create meaningful lifetime savings. It should also be understood that the growth of the traditional account gets taxed and only the contribution portion of the Roth account is subject to taxation
Breaking Down the New Rule: Mandatory Roth Catch‑Up Contributions
If your taxable income in 2025 exceeds $150,000, any catch‑up contributions you make to your TSP must be deposited into your Roth TSP. This applies to all federal employees age 50 or older who are eligible to make catch‑up contributions.
There could be a significant benefit for the federal employee in retirement, but this move could send them into a higher tax bracket or raise the amount due to the IRS next April.
It’s also important to remember that catch‑up limits now vary, also thanks to the SECURE Act 2.0. Standard catch‑up contributions begin at age 50 ($8,000 in 2026) but employees between ages 60 and 63 qualify for an enhanced, higher catch‑up limit ($11,250).
One key point often overlooked: your agency’s 5% matching contributions will still go into your Traditional TSP, even if your catch‑up contributions must be Roth. Matching dollars are always tax‑deferred.
New for 2026: The TSP Roth Conversion Option
Another major change arriving in 2026 is the introduction of in‑plan Roth conversions. For the first time, federal employees will be able to convert money directly from their Traditional TSP balance into their Roth TSP balance without rolling funds out to an IRA.
This gives federal employees a powerful new planning tool. Conversions allow you to intentionally shift money into a tax‑free bucket, especially during lower‑income years or before Required Minimum Distributions (RMDs) begin.
However, conversions come with a critical caution: converting Traditional dollars to Roth dollars creates a tax bill for that year, and the TSP does not allow you to use TSP funds to pay those taxes. You must have outside savings available for the required 20% withholding. For some employees, this makes conversions a strategic opportunity, but they can create unnecessary tax pressure for others. It is important to discuss with a tax consultant before executing.
Advantages of the Roth TSP Should Not Be Overlooked
Even if you’re not required to make Roth catch‑up contributions, the Roth TSP offers several advantages worth considering.
First, there are no income limits. Unlike a private Roth IRA, which restricts high earners from participating at all, the Roth TSP is open to everyone who can invest in the retirement savings program. This makes it one of the few tax‑free retirement vehicles available to federal employees who earn more than the annual limit.
Second, qualified withdrawals are completely tax‑free. As long as you satisfy the five-year rule (account has been open at least 5 years since first Roth contribution) and the age-based requirements (59.5 if in-service, or 55 if you’re retired, as long as you retired at 55 or older), then your contributions and earnings can be withdrawn without paying a penny in taxes.
The following chart demonstrates the benefits:
| TRADITIONAL | ROTH | |
| Contribution | $1,000 | $1,000 |
| Taxes charged during year the contribution tax year (10%) | -$0 | -$100 |
| Growth over 30 years (10% annually)* | +$16,449.40 | +14,804.46 |
| Taxes charges during year withdrawals is made (20%)** | -$3,289.80 | -$0 |
| Net Amount Received | $14,159.60 | $15,704.46 |
* the 10% annual growth rate is for illustrative purposes only.
** the higher tax rate is stemming from the assumption that the employee would be in a higher tax bracket when they retire than when they were working 30 years prior.
As the chart above shows, a $1,000 traditional TSP contribution made in a lower tax bracket creates a tax bill of $3,290 when the contribution and growth are withdrawn during retirement in a higher tax bracket (with less purchasing power due to inflation). However, the same $1,000 in a Roth TSP might be taxed up front ($100) but none are due after. The net amount received from the traditional TSP is roughly $1,545 less than the Roth when withdrawn. Although all of these figures have been very simplified here to demonstrate the point, let’s say you make 15 $1,000 TSP contributions for that initial tax year. Going by the numbers above, the total difference when withdrawn would be $23,175 ($15 x $1,545) when comparing Roth and Traditional balances after taxes.
The third advantage of investing in a Roth account is that balances are exempt from Required Minimum Distributions during your lifetime. Traditional TSP accounts eventually force you to withdraw money whether you need it or not, which can increase your taxable income in retirement. Roth TSP dollars can continue growing untouched, giving you more control over your retirement income strategy.
Finally, Roth accounts create a tax‑free inheritance for your beneficiaries. While non‑spouse heirs must empty the account within 10 years, those withdrawals remain tax‑free, which is an enormous advantage compared to inheriting a Traditional account. Non-spouse inheritances from the TSP can get tricky though, so it is often advised to rollover Roth funds to an outside Roth IRA.
Next Steps for Your Retirement Plan
With updated rules, now is an ideal time to revisit your retirement strategy. Many federal employees benefit from a blended approach, contributing to both Traditional and Roth buckets to create flexibility in retirement and tax diversification. This allows you to manage your tax bracket more effectively, especially when combined with your FERS pension and Social Security.
If you’re unsure how the new rules will affect you, or whether Roth contributions make sense for your situation, now is the time to get clarity. A United Benefits specialist can help you review your income, your TSP contributions, and your long‑term goals to ensure your strategy is aligned with the new landscape.
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