Author: webmaster08012

Postal employees rely on the Thrift Savings Plan as a cornerstone of retirement security. A recent TSP update outlines important clarifications and upcoming changes to Roth TSP accounts that will begin in January 2026. Understanding these changes now is critical so employees can make informed decisions and avoid costly mistakes later.

The TSP update makes clear that Roth TSP and Roth IRAs are not the same. Roth TSP is a retirement account available only through federal employment and exists inside the Thrift Savings Plan. A Roth IRA is a separate individual retirement account opened outside the TSP through a private financial institution. They are governed by different rules under different sections of the tax code, and confusing the two can lead to incorrect guidance when planning for retirement.

Both Roth TSP and Roth IRAs share some similarities. Contributions are made with after tax dollars, meaning taxes are paid before the money goes into the account. Qualified withdrawals of contributions are tax free, and investment earnings can also be withdrawn tax free if IRS requirements are met. Those requirements include meeting the five year rule and being at least age 59½, permanently disabled, or deceased. Neither account requires mandatory minimum distributions during the participant’s lifetime, although beneficiary rules differ.

The differences between the two accounts are significant and directly affect postal employees. Roth TSP contributions can only be made through payroll deductions while employed in a TSP eligible position. Roth IRA contributions can be made from any earned income. Contribution limits are also much higher in the TSP. For 2026, the elective deferral limit for TSP is $24,500, which applies to the combined total of traditional and Roth employee contributions, with additional catch up contributions allowed for eligible participants. Roth IRA contribution limits are lower, set at $7,500 for 2026, or $8,600 for those age 50 or older.

There are no income limits for contributing to Roth TSP, while Roth IRA contributions may be restricted based on income and filing status. Roth TSP contributions may be matched up to 5 percent for eligible FERS employees, although matching contributions always go into the traditional TSP balance, even when the employee contributes to Roth. Roth IRAs do not offer any employer matching contributions.

The update also outlines important changes taking effect in 2026. Beginning January 1, 2026, certain participants will be required to make catch up contributions as Roth contributions. In addition, Roth in plan conversions will become available starting January 28, 2026, allowing eligible participants to convert traditional TSP balances to Roth TSP within their account.

Another key distinction involves rollovers and withdrawal rules. Roth TSP balances can be rolled over into a Roth IRA, but Roth IRAs cannot be rolled into the TSP. When withdrawing from Roth TSP, distributions include both contributions and earnings in proportion to the account balance. Roth IRA withdrawals follow different ordering rules, which can affect tax treatment.

The TSP emphasizes that participants should rely on official TSP resources when making decisions and be cautious about informal advice. While the TSP does not provide financial advice, understanding the rules that apply specifically to the TSP is essential. Employees may also wish to consult a qualified tax or financial advisor when evaluating how these changes affect their retirement planning.

Staying informed is part of protecting your future. Postal employees should review their TSP elections, understand how Roth changes may apply to them in 2026, and share accurate information with coworkers so everyone can plan wisely.