Understanding the 2026 Roth and TSP changes: What federal employees need to know now

Roth strategies are not going away. But the way certain federal employees use them is changing, and the timing of your decisions is becoming far more important.

December 22, 2025 5:09 pm

5 min read

This content is provided by FEBA.

As 2026 approaches, many federal employees are hearing headlines about Roth changes and wondering whether long-standing retirement strategies are disappearing. The short answer is no—Roth strategies are not going away. But the way certain federal employees use them is changing, and the timing of your decisions is becoming far more important.

What is NOT Changing in 2026 (Important first)

Before getting into what’s changing, it’s critical to understand what is not changing. Roth conversions are still fully allowed in 2026 and beyond. Federal employees can continue converting money from a Traditional TSP to a Roth IRA, or from a Traditional IRA to a Roth IRA, with no income limits. These conversions must be completed by December 31 of the year you want them to count for tax purposes. For example, any Roth conversion you want applied to your 2026 tax return must be completed no later than December 31, 2026, even though the taxes won’t be reported and paid until you file in 2027.

Traditional TSP and Roth TSP are also both staying in place. Federal employees can still choose to contribute pre-tax, Roth, or a combination of both, subject to annual contribution limits. Roth IRAs are not being eliminated either. They remain one of the most flexible and powerful tools available, offering tax-free growth, no required minimum distributions, and valuable estate-planning benefits. Direct Roth IRA contributions still follow income limits, but Roth conversions remain unrestricted.

The big 2026 change: Roth-only catch-up contributions for high earners

The major change arriving in 2026 involves catch-up contributions for higher-earning employees. Starting January 1, 2026, federal employees age 50 or older who earned more than $145,000 in the prior year will no longer be allowed to make pre-tax catch-up contributions. This income threshold will be indexed for inflation, but it will affect many GS-13s, GS-14s, GS-15s, SES employees, law enforcement officers with overtime, and other high-grade federal professionals.

An important detail here is timing. Eligibility for the Roth-only catch-up rule in 2026 is based on your 2025 W-2 wages. That means the determination is backward-looking, not speculative. If your 2025 income exceeds the threshold, your catch-up contributions beginning with your first paycheck in January 2026 must go into the Roth TSP.

This change does not affect your regular TSP contributions. Those can still be directed to either Traditional or Roth TSP. However, any catch-up contributions for affected employees must be Roth. For example, a 55-year-old GS-14 earning $160,000 could still choose how their standard TSP contributions are treated, but their catch-up contributions would automatically be Roth starting in 2026.

The immediate impact of this change is felt in your paycheck. Roth contributions are made with after-tax dollars, meaning your taxable income increases and your take-home pay may decrease. For someone forced to put $7,500 into Roth catch-up contributions, that could mean roughly $1,800 more in federal taxes for the year if they’re in the 24% tax bracket. While this may feel painful in the short term, the long-term benefit is meaningful: that money grows tax-free and can be withdrawn tax-free in retirement.

The importance of strategic Roth conversions

This shift is also why Roth conversions become even more strategic for federal employees. When high earners are already being pushed into Roth contributions, it often makes sense to look at the bigger tax picture. Partial Roth conversions, thoughtful tax bracket management, and pre-retirement tax smoothing can help prevent large tax surprises later. This is especially important for federal retirees who will have a pension, Social Security, and TSP distributions all stacking together in retirement.

The most valuable window for Roth conversions often occurs in early retirement, or in the years between retirement and age 73, when required minimum distributions begin. These are often lower-income years where conversions can be done at favorable tax rates. Each year’s Roth conversion must be completed by December 31 to count for that tax year.

Roth IRAs also take on increased importance in this new environment. While income limits still apply for direct Roth IRA contributions, conversions remain fully available. Roth IRAs offer flexibility that other accounts simply don’t—no RMDs, control over taxable income in retirement, and more options for heirs. For many federal retirees, Roth IRAs become the account that provides the most control later in life.

How federal employees should prepare now

So how should federal employees prepare? For those under age 50, the changes don’t apply immediately, but this is the time to begin balancing pre-tax and Roth contributions so you’re not forced into uncomfortable adjustments later. For those age 50 and older with higher incomes, preparation needs to happen sooner. Reviewing tax brackets, understanding how Roth catch-ups will affect cash flow, and coordinating TSP, Roth IRA, and pension income planning should begin well before January 1, 2026.

The bottom line for feds

The bottom line is that 2026 does not eliminate Roth strategies—it changes how and when they’re used. High earners lose access to pre-tax catch-up contributions, Roth TSP becomes mandatory for those catch-ups, and tax planning becomes more important, not less. For federal employees with pensions, coordinated planning is essential.

Handled correctly, these changes can actually create an opportunity. Many federal employees will end up building more tax-free income, reducing future RMD pressure, and gaining greater flexibility in retirement. The key is understanding the rules, respecting the deadlines, and planning ahead—rather than reacting after the fact.