Required Minimum Distributions, Everything You Need to Know
I believe that leaving your future to chance is a recipe for a stressful retirement. Over the years, I’ve heard countless federal employees ask about how to manage their Thrift Savings Plan (TSP) and other retirement accounts as they age.
The IRS patiently waits for you to grow your Traditional TSP for decades, but ultimately, they are going to get their cut. Required Minimum Distributions (RMDs) are their way of forcing you to pull that money out and pay the taxes due. If you aren’t prepared, RMDs can skyrocket your tax bracket and dramatically increase your Medicare Part B premiums.
To help you protect what you’ve worked a lifetime to accumulate, let’s dive into everything you need to know about RMDs and how to properly plan for them.
Thrift Savings Plan (TSP) 2026 Overview and Considerations
What Are RMDs and When Do They Start?
RMDs are mandatory annual withdrawals from your tax-deferred retirement accounts, which include your Traditional TSP, Traditional IRAs, and 401(k)s. Fortunately, thanks to recent legislative changes like the SECURE Act 2.0, Roth accounts—including both the Roth TSP and Roth IRAs—are no longer subject to RMDs during the original owner’s lifetime.
The age at which you must start taking RMDs depends on the year you were born:
- If you were born between 1951 and 1959, your RMD age is 73.
- If you were born in 1960 or later, your RMD age is 75.
The First RMD Trap (April 1 vs. December 31)
You are required to take your very first RMD by April 1 of the year following the year you reach your RMD age. However, there is a massive trap here. If you delay that first RMD until April 1, you must still take your second RMD by December 31 of that exact same year.
Taking two RMDs in a single calendar year can easily push you into a much higher tax bracket and trigger Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges. Because of this, it is generally much smarter to take your first RMD by December 31 of the year you actually turn your RMD age, spreading your tax liability evenly over two years.
How Much Will You Have to Withdraw?
The IRS does not use a flat dollar amount; your RMD is calculated by dividing your account balance as of December 31 of the prior year by a life expectancy factor found in the IRS Uniform Lifetime Table. Because both your age and your account balance change every year, your RMD must be recalculated annually.
Typically, your first RMD will be around 4% of your total balance, but that percentage steadily increases as you get older. If you have been a diligent saver and amassed a $1 million or $2 million TSP balance, these forced withdrawals can be enormous, reaching well into the six figures as you age.
Rules for Multiple Accounts
If you hold multiple Traditional IRAs, the IRS allows you to calculate the RMD for each individual IRA, add them together, and take the total combined withdrawal from just one IRA.
Do not attempt this with your TSP.
Employer-sponsored plans like the TSP operate under different rules. You must calculate and withdraw your TSP RMD separately from your TSP account; you cannot satisfy a TSP RMD by taking extra money out of an outside IRA, and vice versa.
The 25% Penalty Trap
Uncle Sam is incredibly serious about RMD compliance. If you fail to withdraw the full required amount by the deadline, you will be hit with an excise tax penalty equal to 25% of the amount you failed to withdraw. This can sometimes be reduced to 10% if you correct the error within two years, but it is still a painful penalty. Always double check your account to ensure the required RMD funds were withdrawn before the end of the year, especially for non-TSP retirement accounts.
There is some good news for federal employees: if you forget to take your RMD from the TSP, the TSP will automatically calculate and withdraw it for you at the end of the year to save you from the IRS penalty. However, you are strictly on your own to make sure your private IRA RMDs are satisfied.
This happened to my wife last year. We both processed our RMDs from our non-TSP IRA accounts on the same date but hers didn’t go through. I didn’t find out about this until I started our taxes in mid-January. Mary immediately withdrew the funds from her account and paid the taxes due. My only recourse was to file an IRS Form 5329 and add a statement at the end explaining the error. Hopefully, they will waive the penalty, time will tell.
Strategies to Defuse the RMD Tax Bomb
If you have a large Traditional TSP balance, you must take proactive steps to minimize the tax hit before your RMD age arrives. Here are three highly effective strategies:
- Execute Roth Conversions: The most powerful way to defuse RMDs is to convert Traditional, pre-tax money into a Roth account. You will pay taxes on the converted amount in the year you make the transfer, but all future growth and withdrawals are 100% tax-free, and Roth accounts have no RMDs. Starting in 2026, the TSP is officially launching a Roth in-plan conversion feature, allowing you to convert your Traditional TSP balance directly into your Roth TSP without having to roll it out to an IRA first. I converted half of my business IRA to a Roth back in 2011, and the massive tax-free growth since then has dramatically reduced my RMDs today.
- Strategic Early Withdrawals: Consider taking voluntary distributions from your Traditional accounts during the “gap years”—the years between when you retire and when your Social Security and RMDs begin. By strategically withdrawing funds up to the top of your current, lower tax bracket, you shrink the balance that will eventually be subject to forced RMDs later in life.
- Qualified Charitable Distributions (QCDs): If you are charitably inclined, you can send your RMD directly to a qualified charity. When you do this, the money completely disappears from your adjusted gross income, meaning it doesn’t impact your tax bracket or your Medicare premiums at all. Note: The TSP does not currently allow direct QCDs. To use this strategy, you must first roll your TSP funds over into a private IRA.
Final Thoughts
I decided to cover this subject in more detail after running into several issues over the past year with my wife’s and my RMDs. When I applied for our RMDs last October, mine went through, but for some reason, my wife’s didn’t. I discovered the error in mid-January while working on our taxes.
Another consideration is that the withdrawal percentage starts around 3.77% at age 73 and rises to roughly 10% by age 93, with the amount based on your prior year-end balance and IRS Uniform Lifetime Table. What caught me off guard this year is that our account balance increased significantly in 2025 due to a strong stock market, and our RMDs skyrocketed.
Don’t wait until the IRS forces your hand. Sit down, evaluate your balances, and consider consulting a qualified financial planner or tax professional to build a strategy. Taking charge of your retirement planning today will save you and your heirs a fortune in taxes down the road.
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Dennis V. Damp is an author, retired federal manager, business owner, career counselor and veteran. Damp is the author of 28 books, a recognized benefits expert, and a retired federal manager with 35 years’ service. Dennis has been a guest on hundreds of radio talk shows, CNN’s YOUR MONEY and the Lou Dobbs Cable TV shows, lectured at universities and colleges, produced Internet web sites and training videos, and has written hundreds of articles for national magazines and newspapers. His books have been featured in the Wall Street Journal, Washington Post, New York Times and U.S. News & World Report.
Dennis joined the Air Force in 1968 and spent over three years on active duty and an additional seven years with the Air National Guard. He was hired by the Department of Defense (DOD) after leaving active duty and transferred to the Federal Aviation Administration (FAA) in 1975. He spent the remainder of his career in various positions with the FAA. His last position was technical operations manager at the Pittsburgh International Airport’s air traffic control tower.
