Required Minimum Distributions (RMD) must occur from all of your tax deferred accounts. This will include your Traditional TSP (not the ROTH TSP balances). In addition, this will include funds held in IRAs, old 401k and Profit Sharing Plans. A few strategies exist to eliminate or reduce the RMD which can most commonly include Roth Conversions and some types of charitable donation strategies. Each of these can work well for some situations. However, in most cases the federal employee will experience some amount of required withdrawal which you will be forced to pay taxes on. You can always talk to us or other qualified professional for assistance. This area can be complicated and a proper strategy can make a huge difference in your overall income plan once you are required to take the RMD.

Section 1: Regulatory Context

RMDs are mandatory annual withdrawals required by Internal Revenue Code Section 401(a)(9) once a participant reaches a specific age and is separated from federal service. The SECURE 2.0 Act of 2022 progressively increased the “Required Beginning Date” (RBD) age. For participants born between 1951 and 1959, the RMD age is 73; for those born in 1960 or later, it will increase to 75 starting in 2033. Failure to withdraw the required amount may result in an IRS excise tax of 25% of the shortfall, which may be reduced to 10% if corrected within two years.

Section 2: If/Then Scenarios

• If a participant is still actively employed by the federal government, then they are not required to take RMDs from their TSP, regardless of age, until April 1 of the year following their separation.
• If a participant is still actively employed by the federal government, and has other IRA or 401k accounts, then they are required to take RMDs from these accounts (not the TSP).
• If a participant has a Roth TSP balance, then as of 2024, that balance is excluded from RMD calculations and is not subject to mandatory lifetime distributions.
• If the account is a Spousal Beneficiary Participant Account, then the RMD calculation still includes the entire balance (both Traditional and Roth), and any distribution counts toward the requirement.
• If a participant reaches their RMD age in 2026, then they must take their first RMD by April 1, 2027, though doing so will require taking a second RMD for the 2027 tax year by December 31. 

Section 3: System Integration

The TSP record keeper calculates RMDs annually based on the account’s prior-year December 31 balance and IRS life expectancy tables. In early January, the TSP sends RMD Calculation Notices to affected separated participants and spousal beneficiaries. If a participant’s total voluntary withdrawals throughout the year do not satisfy the RMD, the system will automatically trigger a supplemental payment in mid-December to meet the legal minimum. These payments are issued pro rata from all available investment funds. 

In most cases, if you have other IRA and 401k accounts you will be notified by your custodian of these requirements. However, it is important to remember you are responsible for setting up your withdrawals to occur each year. We recommend automating the withdrawal so you do not forget.

Section 4: 3-Step Action Plan

1. Monitor Your Secure Mailbox: Review the RMD Notice sent in January via My Account to confirm your specific required amount for the current tax year.
2. Coordinate Voluntary Withdrawals: If you plan to take Installment Payments or lump sums, ensure they are scheduled to be processed before the mid-December automated RMD deadline to maintain control over your tax withholding.
3. Update Direct Deposit: Confirm your financial institution information in My Account to ensure any automated supplemental RMD payments are deposited correctly and avoid paper check delays. 

Summary

Your RMD requirements can be tricky and ultimately the burden is on your for proper and timely withdrawals. One rule that is nice to remember is that you do not need to take from all of your accounts each year. You can selectively choose which accounts you want to withdraw from each year. This is an excellent planning tool. It means you can pick and choose which accounts based on account performance and your goals will work best for you. This is an area where working with a qualified professional can help improve your position and help make sure you satisfy all of the rules with a well coordinated strategy that fits your overall tax and income strategy for your retirement.