A Roth conversion moves money from a traditional retirement account into a Roth account, with taxes paid upfront in exchange for tax-free growth. Income tax is owed on the converted amount in the year of conversion. Roth accounts have no required minimum distributions during the owner's lifetime, and a lower-income window before Social Security or RMDs can be a good time to convert. Roth funds can pass to heirs tax-free.
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A Roth conversion is when you move money from a traditional retirement account like a traditional TSP or traditional IRA into a Roth account. You pay income tax on the amount you convert now, and in exchange, that money grows tax-free and comes out tax-free in retirement.
Here's the part that's worth understanding. Your tax rate in retirement isn't fixed. For federal employees on Disability Retirement especially, there's often a window where your income drops significantly before Social Security kicks in, before you turn 62, or before RMDs start. That lower income window can be an opportunity. You may be able to convert at a lower tax rate than you'd face later.
The long-term benefits are real. Roth accounts don't have required minimum distributions during your lifetime, which gives you more control over your income in later years. And if you're thinking about what you'd like to leave to a spouse or heirs, tax-free inheritance has obvious value.
The trade-off is that you're paying taxes now instead of later, and that has to make sense in the context of your full financial picture. There's no universal right answer here. It depends on your current income, your projected income in retirement, your timeline, and your goals. If you're in a lower income period right now, it's worth at least having the conversation.
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