This article by Jonathan Snyder originally appeared on Stripes.com. Stars and Stripes serves the U.S. military community by providing editorially independent news and information around the world.

The federal government’s Thrift Savings Plan for service members and civilian employees will allow participants to transfer money from their traditional accounts into the plan’s Roth accounts starting in 2026, according to the Federal Retirement Thrift Investment Board.

The option provides some flexibility in retirement financial planning, but it leaves some questions unanswered, according to a financial adviser.

“Adding the option for in-plan Roth conversions could offer future tax advantages for many TSP participants,” Jerel Harvey, founder of Fedway Financial, told Stars and Stripes by email Dec. 21.

“While this provides some useful tax planning opportunities, it’s still unclear whether in-plan Roth conversions will have restrictions compared to the more traditional route of using a Roth [individual retirement account],” he said.

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The Roth transfer option was announced at the Nov. 21 meeting of the Federal Retirement Thrift Investment Board, board spokesman James Kaplan said by email Dec. 20. The benefit is expected to be available to all participants, except non-spousal beneficiaries or alternate payees, he said.

The Thrift Savings Plan is the federal government’s defined contribution retirement savings plan. It consists of a traditional option similar to a 401(k) and a Roth option.

In 401(k) accounts, payroll contributions are made into the plan before income tax is withheld, which may lower the participant’s income tax rate. Those taxes are eventually paid when the investment savings are withdrawn in retirement.

Contributions to a Roth account are made after the payroll deduction for federal income tax, so retirement withdrawals are tax free.

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The Thrift Savings Plan has approximately 7.2 million participants and beneficiaries, with about 38% of participants having some money invested in a Roth account. However, only 7% of total plan assets are held in Roth accounts, Kaplan said.

The Thrift Savings Plan has a Roth direct investment option, but so far it hasn’t accommodated transfers from traditional accounts. Instead, some account holders were converting funds from their traditional accounts into Roth accounts outside the TSP, Kaplan said.

A 2024 satisfaction survey of Thrift Savings Plan participants found that 35% were likely or extremely likely to take advantage of an in-plan Roth conversion feature, he said.

“An In-Plan Roth Conversion option will provide additional features to the TSP and may provide an incentive for participants to remain in the TSP,” he said.

Kaplan said some details of the in-plan conversion are being worked out. However, the conversion feature is expected to result in a tax bill that cannot be paid with Thrift Savings Plan assets.

Transferring retirement funds from a traditional to a Roth account has other tax implications, so choose wisely, Harvey said.

“When you convert funds, the transferred amount is taxed as ordinary income,” he said. “This can lead to a significant tax bill for that year, so it’s important to have a plan to cover the taxes. Think about how this decision might affect your savings, investments, or current cash flow. A conversion could also push you into a higher tax bracket or increase your Medicare premiums.”