At some point in retirement, the IRS requires you to start withdrawing money from your retirement accounts.
For federal employees, this includes your Thrift Savings Plan (TSP).
These withdrawals are called Required Minimum Distributions (RMDs).
To model your retirement income:
https://fersfree.com
What Are RMDs?
RMDs are the minimum amount you must withdraw each year from your retirement account once you reach a certain age.
They apply to:
- Traditional TSP
- Traditional IRAs
- 401(k) accounts
They do NOT apply to Roth TSP while you are alive (if rolled properly into a Roth IRA).
When Do RMDs Start?
As of current rules:
- RMDs begin at age 73 (for most retirees)
Your first RMD must be taken by:
- April 1 of the year after you turn 73
After that, withdrawals must be taken annually.
How Are RMDs Calculated?
The formula is:
Account Balance ÷ IRS Life Expectancy Factor
Example:
- TSP Balance: $500,000
- Factor: 26.5
$500,000 ÷ 26.5 = $18,867 required withdrawal
Why RMDs Matter
RMDs affect:
- Your taxable income
- Your tax bracket
- Social Security taxation
- Medicare premiums (IRMAA)
They can significantly increase your tax burden if not planned for.
TSP-Specific Considerations
Unlike IRAs, the TSP:
- Requires full RMD compliance across the account
- Has limited flexibility compared to some brokerage accounts
Many retirees choose to roll TSP into an IRA for more control.
Roth TSP and RMDs
Roth TSP accounts are subject to RMDs unless:
- You roll them into a Roth IRA
Roth IRAs do not require RMDs during your lifetime.
Example Scenario
- Age 73
- TSP: $600,000
- Required withdrawal: ~$22,600
This amount is added to your taxable income.
5 Common Mistakes
- Forgetting to take RMDs
- Not understanding tax impact
- Ignoring Roth conversion strategies
- Keeping all funds in Traditional TSP
- Not planning ahead before age 73
Strategies to Manage RMDs
- Consider Roth conversions before RMD age
- Withdraw gradually before 73
- Manage taxable income each year
- Evaluate IRA rollover options
What to Do Next
Before reaching RMD age, compare:
- Traditional vs Roth balances
- Withdrawal strategies
- Tax impact scenarios
Disclaimer
This article is for educational purposes only. Consult a tax professional for personalized guidance.