If you’re a federal employee thinking about retiring soon, 2026 is shaping up to be a big year for changes that could impact your retirement savings, taxes, and even your healthcare costs. With updates to the Thrift Savings Plan (TSP), new tax rules, and shifts in Medicare, it’s important to be prepared so you don’t get caught off guard.
Here’s a simple breakdown of the most important changes on the horizon — and what they might mean for you.
1. New Roth Conversion Option in the TSP
Starting January 2026, you’ll be able to move money from your traditional (pre-tax) TSP account into your Roth TSP account without leaving the plan. This is called an in-plan Roth conversion.
Why it matters:
- Traditional TSP withdrawals are taxable, but Roth withdrawals (when qualified) are tax-free.
- Converting to Roth gives you the option to build a larger pool of retirement savings that’ll be tax-free on withdrawal, though you’ll pay taxes on the amount converted to Roth.
- If you’re planning to retire soon, 2026 could be the perfect time to consider whether shifting part of your balance makes sense. Timing, amount, market variability, all make a difference in the effectiveness of a Roth Conversion.
2. Roth Catch-Up Contributions for High Earners
If you’re 50 or older and making catch-up contributions to your TSP, heads up: starting in 2026, higher earners will have to make those contributions as Roth (after-tax) rather than traditional pre-tax. If you made more than $145,000 last year, your catch-up contributions (the extra $7,500 on top of the $23,000 base in 2025) must go into Roth for 2026.
Why it matters:
- You may lose the immediate tax break for those contributions.
- On the plus side, those Roth contributions will grow and come out tax-free in retirement.
- It’s worth checking your payroll elections so you’re not surprised when your take-home pay looks a little different.
3. Tax Changes from the “One, Big, Beautiful Bill”
Congress recently passed what’s being called the One, Big, Beautiful Bill (H.R.1). For retirees, one of the biggest perks is an extra $6,000 deduction for taxpayers age 65 and older (per person) between 2025 and 2028. That’s in addition to the usual senior standard deduction.
Why it matters:
- Many retirees will see their taxable income drop.
- The deduction phases out at higher income levels, so not everyone will benefit equally.
- Other tax provisions are shifting too, so it’s important to review your full picture.
4. Medicare Cost Changes in 2026
Healthcare is always one of the biggest costs in retirement, and 2026 brings some changes worth noting:
- Prescription Drug Costs Capped: Out-of-pocket expenses under Medicare Part D will be capped at $2,100 for the year.
- Medicare Premiums: Part B premiums are projected to rise again, and depending on your income, you could face IRMAA (Income-Related Monthly Adjustment Amount) surcharges.
Why it matters:
- These adjustments can have an impact on your monthly budget.
- If you’re considering Roth conversions or taking large withdrawals, keep in mind that extra taxable income could raise your Medicare premiums two years later.
5. Required Minimum Distributions (RMDs) & IRS Updates
If you’re nearing the age when RMDs kick in, be sure to keep an eye on the latest IRS updates. The SECURE Act raised the RMD age in recent years, and rules continue to evolve. Taking your RMDs at the right time is crucial to avoid penalties and headaches.
Also, don’t forget the IRS updates tax brackets and contribution limits each year for inflation — those 2026 adjustments will be announced at the end of 2025.
Your Retirement Checklist for 2026
Here’s a quick list to keep you on track:
- Review whether a TSP Roth conversion makes sense for you.
- Double-check your catch-up contribution and fund UPelections
- See if you qualify for the new senior deduction.
- Plan for Medicare changes — especially drug coverage and premiums.
- Keep RMD rules and IRS tax updates on your radar.
Don’t Navigate 2026 Alone
With so many moving parts — from TSP changes to new tax rules and Medicare adjustments — retirement planning in 2026 can feel overwhelming. But you don’t have to go it alone.
At Benchmark Financial Group, we specialize in helping federal employees understand their benefits and make decisions about retirement that suit their goals. Whether you need help with TSP strategies, tax planning, or Medicare guidance, we’re here to make sure you head into retirement with confidence.
Ready to talk? Contact Benchmark Financial Group today and let’s build your retirement plan together. To get started, schedule an appointment today with Benchmark Financial Group by filling out the form online or calling David Raetz at 913-534-8256 to discuss your financial needs.
*Securities and Advisory Services Offered Through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor. Benchmark Financial Group, LLC and CreativeOne Securities, LLC are not affiliated.
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