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, 2026Convert traditional TSP to Roth TSP while still serving (previously had to wait until separation or age 59½)Can do up to 26 conversions per yearEntire converted amount added to taxable income for that yearCritical: TSP does NOT allow tax withholding; must have cash set aside externallyConversions are irreversible (no recharacterization allowed) The Combat Zone Golden Opportunity CZTE (Combat Zone Tax Exclusion) drops taxable income to near-zeroCan convert large traditional TSP balances at 0-12% tax rates during deployment yearDon't have to convert while physically in combat zone—any time during that tax yearExample: E-5 deployed full year could convert $50,000+ at minimal tax costCombat 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 incomeBest time #2: During market downturns—pay tax on lower value, convert more sharesExample: $10,000 balance drops to $5,000, convert at 12% = $600 tax vs. $1,200Don't tie conversions to deployment timing—tie to when you can see full-year income pictureCan 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 lifespansOne: Optimize for surviving spouse facing higher single tax rates (widow/widower penalty)Zero: Optimize for heirs—prepay tax bill, leave Roth money to childrenAdvanced 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 amountsComplex family situations (multiple income sources, kids in college)High-income earners considering large conversionsAnyone uncertain about tax projectionsUse MFAA advisors, Military Tax Experts Alliance, or fee-only CFPs Resources & Links Wingman Wealth: wingmanwealth.comMilitary Financial Advisors Association (MFAA): militaryfinancialadvisors.orgFighter Pilot Finance Facebook Group (managed by Alf)Nectarine: hellonectarine.com (fee-only advisor consultations)Military Tax Experts Alliance: militarytaxexperts.orgIRS Estimated Tax Payments: irs.govDinky 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 Spencer and Jamie offer one-on-one Military Money Mentor sessions. Get your personal military money and personal finance ...