New TSP Rules: What Federal Employees Need to Do Right Now

Jun 16

For those who plan ahead, the changes to the TSP create real opportunities.

The Rules Changed. Your Strategy Should Too.

If you’re a federal employee and you haven’t reviewed your Thrift Savings Plan elections lately, now is the time. Several important changes took effect in 2026 that affect how much you can save, how it’s taxed, and how much flexibility you’ll have once you retire.

The good news: for those who plan ahead, these changes create real opportunities. Here’s what matters most.

Higher Contribution Limits — and How to Use Them

The TSP contribution limit increased to $24,500 in 2026, up $1,000 from last year. If you’re 50 or older, you can add another $8,000 in catch-up contributions for a total of $32,500. And if you turn 60, 61, 62, or 63 this year, a SECURE 2.0 “super catch-up” provision raises your ceiling to $35,750 total.

One reminder for FERS employees and Military members covered by the Blended Retirement System: spread your contributions evenly across the year. If you front-load and hit the annual cap early, your contributions stop; so does the 5% agency match. That’s free money left on the table.

The Roth Catch-Up Requirement

Starting in 2026, if you earned more than $150,000 in 2025, your catch-up contributions must go into the Roth TSP rather than traditional pre-tax. Those dollars are taxed now, not later.

For many near-retirement service members and federal employees, this is actually a planning opportunity. Your FERS pension creates a baseline of taxable income throughout retirement, which means having a Roth source to draw from tax-free can be genuinely valuable. The forced shift is nudging people toward a more balanced tax picture in retirement.

Roth In-Plan Conversions Are Now Available

This is the biggest change of the year. TSP participants can now convert traditional (pre-tax) balances to Roth directly inside the plan, no separation from service, no IRA rollover required. This creates a meaningful planning window for employees who retire before Social Security begins. In those lower-income years, a Roth conversion at a controlled tax rate can permanently reduce lifetime taxes.

For service members deploying to a Combat-Zone Tax-Exclusion location, this may be a great opportunity for an in-plan conversion. Navigating tax rules for deployed service members can get complicated. We are here to help you make the most of your hard-earned benefits.

For a deeper look at the contribution side of the equation, see our post on 2026 TSP contribution changes.

Don’t Overlook Beneficiary Designations

One often-missed piece of TSP planning: your beneficiary designations don’t follow your will. They follow what’s on file with TSP; outdated designations are one of the most common (and costly) estate planning mistakes we see. Make sure yours are current. We cover this in detail in our post on TSP beneficiary planning.

Have questions about how these changes affect your specific situation? Reach out. This is exactly the kind of planning we do every day with military service members and federal employees approaching retirement.

Becky Meats, CPA/PFS

Becky Meats is a Certified Public Accountant and partner at Clear Insight Wealth Management, a wealth management firm for military families, government employees, and business owners looking for a clear path to living their best lives. A firm believer that money is a tool that allows us to make our dreams happen, Becky thrives off simplifying clients’ finances and helping them find financial success.

Becky obtained her bachelor’s degree from Washington State University and has over 16 years of experience in accounting. She is a Certified Public Accountant (CPA) and Personal Financial Specialist (PFS). Becky maintains AICPA certifications in retirement planning, estate planning, risk management and insurance, and investment planning.

https://www.myciwm.com/team/becky-meats