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 Points

Roth 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

Resources & Links

• 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

Key Takeaways

• TSP in-plan conversions launched January 28, 2026—military members can now convert traditional TSP to Roth while still serving without waiting for separation

• 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

• You must have external cash for taxes—TSP does NOT allow withholding from conversions; need savings, refund, or estimated payments ready

• 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

• Conversions are irreversible—no recharacterization allowed, so measure twice and do tax projections before converting

• Market downturns are conversion opportunities—when account value drops 50%, you pay tax on half the value but convert the same number of shares

• BRS members have automatic conversion candidates—5% government match always goes traditional, creating ongoing conversion opportunities if you're in low brackets

• State residency matters enormously—converting while legal resident of Texas saves 5-13% vs. high-tax states like California or New York

• 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

• 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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