2026 TSP Update: Navigating New Limits and Roth Requirements
The start of 2026 brings highly technical changes to the Thrift Savings Plan (TSP). For the Foreign Service community, understanding these tiers is the difference between an optimized plan and a missed opportunity.
The New Contribution Tiers
The standard deferral limit is now $24,500. However, the catch-up amounts are now split based on your age:
- Ages 50–59 & 64+: $8,000 catch-up ($32,500 total)
- Ages 60–63: $11,250 catch-up ($35,750 total)
Mandatory Roth for High Earners
If your 2025 Medicare wages (W-2 Box 5) were above $150,000, SECURE 2.0 requires your catch-up contributions to be Roth. While you can still designate your first $24,500 as Traditional (pre-tax), any amount above that will automatically be diverted to your Roth TSP balance by payroll.
Roth In-Plan Conversions
As of late January 2026, a long-awaited feature has arrived: Roth In-Plan Conversions. You can now move money from your Traditional (pre-tax) balance to your Roth (after-tax) balance directly within the TSP. This is a significant opportunity for tax-bracket management, especially for those in lower-income transition years. However, the TSP will not withhold taxes from the conversion; you must have the cash on hand to pay the IRS.
Special Category Employees (SCE)
For Law Enforcement Officers, Firefighters, and Air Traffic Controllers, the "Rule of 25" is now in full effect. You can access your TSP penalty-free after 25 years of service, regardless of your age. Remember, this specific exception only exists within the TSP; rolling these funds into an IRA before age 59½ could result in losing this penalty-free access.
Securing the Match
The 5% USG match is earned pay period by pay period. To ensure you capture the full 5% throughout the year, aim for a consistent deferral across all 26 pay periods:
- Under 50: $943 / pay period
- Age 50–59: $1,250 / pay period
- Age 60–63: $1,375 / pay period
Consistency is the only way to guarantee that the USG pays you the full match you've earned.