With the introduction of Roth, you will potentially have two types of balances in your TSP account: A traditional (non-Roth) TSP balance and a Roth TSP balance. Any agency contributions you receive will always be a part of your traditional (non-Roth) balance. However, you may designate your own contributions any way you like depending on your individual tax circumstances. (Note: Money already in your account when you begin making Roth contributions will remain part of your traditional balance. You will not be able to convert it to Roth.)

The table below compares the treatment of the two different types of contributions.

The Treatment of… Traditional TSP Roth TSP
Contributions Pre-tax After-tax1
Your Paycheck Taxes are deferred, so less money is taken out of your paycheck. Taxes are paid up front, so more money comes out of your paycheck.
Transfers In Transfers allowed from eligible employer plans and traditional IRAs Transfers allowed from Roth 401(k)s, Roth 403(b)s, and Roth 457(b)s
Transfers Out Transfers allowed to eligible employer plans, traditional IRAs, and Roth IRAs2 Transfers allowed to Roth 401(k)s, Roth 403(b)s, Roth 457(b)s, and Roth IRAs3
Withdrawals Taxable when withdrawn Tax-free earnings if five years have passed since January 1 of the year you made your first Roth contribution, AND you are age 59½ or older, permanently disabled, or deceased
1 Roth contributions are subject to Federal (and, where applicable, state and local) income taxes, while traditional contributions are not taxed until withdrawn. However, both Roth contributions and traditional contributions are included in the amount of wages used to calculate payroll taxes (e.g., Social Security taxes).
2 You would have to pay taxes on any pre-tax amount transferred to a Roth IRA.
3 Transfers to a Roth IRA from a Roth TSP are not subject to the income restrictions that apply to Roth IRA contributions.

As we get closer to the date when you can start making Roth contributions, you may want to start thinking about whether making them could be to your advantage.  You may also wish to consult a qualified financial or tax advisor.