
The Military Money Manual Podcast Roth In-Plan Conversions TSP with Brain "ALF" O'Neill #211
Starting January 28, 2026, military members can finally convert their traditional TSP to Roth while still serving...and if you're deployed to a combat zone, you could convert tens of thousands at near-zero tax rates.
Brian "ALF" O'Neill from Wingman Wealth breaks down the game-changing TSP in-plan conversion feature and reveals why this could be a 6- or 7-figure lifetime tax savings for service members who get the strategy right.
Main PointsRoth vs Traditional Basics- Roth is "tax insuranc" against future taxation
Why Military Tax Rates Are So Low
What Are TSP In-Plan Conversions?
- New feature launched January 28, 2026
- Convert traditional TSP to Roth TSP while still serving (previously had to wait until separation or age 59½)
- Can do up to 26 conversions per year
- Entire converted amount added to taxable income for that year
- Critical: TSP does NOT allow tax withholding; must have cash set aside externally
- Conversions are irreversible (no recharacterization allowed)
The Combat Zone Golden Opportunity
- CZTE (Combat Zone Tax Exclusion) drops taxable income to near-zero
- Can convert large traditional TSP balances at 0-12% tax rates during deployment year
- Don't have to convert while physically in combat zone—any time during that tax year
- Example: E-5 deployed full year could convert $50,000+ at minimal tax cost
- Combat zone contributions also pro-rata (10% CZTE balance = only 90% of conversion taxable)
- This opportunity disappears after separation—can't replicate as civilian
Tax Planning Essentials
Paying the Tax Bill
Strategic Timing for Conversions
- Best time #1: End of year (November-December) when you know actual income
- Best time #2: During market downturns—pay tax on lower value, convert more shares
- Example: $10,000 balance drops to $5,000, convert at 12% = $600 tax vs. $1,200
- Don't tie conversions to deployment timing—tie to when you can see full-year income picture
- Can dollar-cost-average with multiple conversions throughout year (but probably unnecessary)
The "2-1-0" Framework (Advanced)
- Two: Optimize for two spouses, married filing jointly, similar lifespans
- One: Optimize for surviving spouse facing higher single tax rates (widow/widower penalty)
- Zero: Optimize for heirs—prepay tax bill, leave Roth money to children
- Advanced strategy: High-earning children gift parents money for Roth conversions at parent's lower rate
Who Should Convert and How Much
Five-Year Rules and Withdrawal Restrictions
Common Mistakes to Avoid
Implementation Details
Related Strategies
When Professional Help Makes Sense
- First-time converters with 5-figure amounts
- Complex family situations (multiple income sources, kids in college)
- High-income earners considering large conversions
- Anyone uncertain about tax projections
- Use MFAA advisors, Military Tax Experts Alliance, or fee-only CFPs
- Wingman Wealth: wingmanwealth.com
- Military Financial Advisors Association (MFAA): militaryfinancialadvisors.org
- Fighter Pilot Finance Facebook Group (managed by Alf)
- Nectarine: hellonectarine.com (fee-only advisor consultations)
- Military Tax Experts Alliance: militarytaxexperts.org
- IRS Estimated Tax Payments: irs.gov
- Dinky Town Calculators (free tax projection tools): dinkytown.net/taxes.html
Related Podcast Episodes:
- Episode 2: TSP Deep Dive (most popular episode)
- Various TSP fund analysis episodes
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TSP in-plan conversions launched January 28, 2026—military members can now convert traditional TSP to Roth while still serving without waiting for separation
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Combat zone deployments create once-in-a-lifetime opportunities—CZTE income drops taxable income to near-zero, enabling $50,000+ conversions at 0-12% tax rates
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You must have external cash for taxes—TSP does NOT allow withholding from conversions; need savings, refund, or estimated payments ready
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Most military members face higher retirement tax rates—pension + civilian job + Social Security likely pushes you into 22-24% brackets, making Roth conversions at current 10-12% rates a no-brainer
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Conversions are irreversible—no recharacterization allowed, so measure twice and do tax projections before converting
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Market downturns are conversion opportunities—when account value drops 50%, you pay tax on half the value but convert the same number of shares
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BRS members have automatic conversion candidates—5% government match always goes traditional, creating ongoing conversion opportunities if you're in low brackets
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State residency matters enormously—converting while legal resident of Texas saves 5-13% vs. high-tax states like California or New York
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This could be six-figure lifetime tax savings—depending on account size, career length, and strategy execution, potential $10,000-$100,000+ in tax savings
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November is optimal conversion month—you know actual income for the year, can calculate exact bracket room, and avoid year-end surprises
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