Delaying TSP Withdrawals Might Seem Smart—Until Required Minimums Kick In

Missy E
November 14, 2025

Key Takeaways

If you wait too long to start Thrift Savings Plan (TSP) withdrawals, Required Minimum Distributions (RMDs) can force you to withdraw more than you intended—triggering higher taxes and unexpected disruptions to your retirement strategy.
Starting strategic withdrawals earlier can help you manage tax liability, reduce RMD burdens, and maintain better control over your TSP funds throughout retirement.

Why Delaying TSP Withdrawals Can Backfire

Delaying withdrawals from your TSP might initially seem like a smart way to preserve your retirement nest egg. After all, the longer you leave your money untouched, the more time it has to grow. But once you reach the age when Required Minimum Distributions kick in, the IRS takes control of the schedule—and it may not be aligned with your retirement goals.

As of 2025, you must begin taking RMDs from your TSP account by April 1 of the year following the year you turn age 73. The rules apply whether you need the money or not. If you don’t take the required amount on time, you could face a steep penalty: 25% of the amount that should have been withdrawn, reduced to 10% if corrected in a timely manner.

Understanding Required Minimum Distributions

What Are RMDs?

Required Minimum Distributions are IRS-mandated withdrawals that apply to tax-deferred retirement accounts, including your TSP. The government wants to eventually collect taxes on money you’ve deferred for years, and RMDs ensure that happens.

When Do RMDs Start?

If you turned 73 in 2025, you must take your first RMD by April 1, 2026. For every subsequent year, your RMD is due by December 31. If you delay your first RMD until April of the following year, you’ll end up having to take two distributions in that year—one for the previous year and one for the current.

How Are RMDs Calculated?

The RMD is based on your account balance as of December 31 of the prior year, divided by a life expectancy factor published by the IRS. The higher your balance, the more you’re required to withdraw.

Risks of Delaying Withdrawals

While delaying TSP withdrawals allows your balance to grow tax-deferred, it can create several problems once RMDs kick in:

Large Taxable Withdrawals: If your TSP account grows significantly, your RMDs will be larger. That can push you into a higher tax bracket, reducing the after-tax value of your retirement income.
Double Withdrawals in One Year: Delaying the first RMD until the following April results in two RMDs in the same year, doubling your taxable income for that year.
Less Flexibility: Once RMDs start, you’re obligated to take them—even if you don’t need the income or if market conditions are unfavorable.
Impact on Other Benefits: Higher income from RMDs can increase your Medicare Part B premiums and reduce eligibility for certain tax credits.

Strategic Withdrawals Before RMD Age

To avoid the downsides of RMDs, many retirees are choosing to begin withdrawals from their TSP accounts before reaching age 73. This can be done strategically to minimize long-term tax exposure and maintain flexibility.

Consider These Steps:

Start Withdrawals at 59½: This is the earliest age you can withdraw from your TSP without incurring a 10% early withdrawal penalty. Beginning withdrawals at this stage helps spread your tax liability over more years.
Convert Some TSP Funds to Roth: While Roth TSPs are also subject to RMDs (unless rolled into a Roth IRA), converting to a Roth IRA eliminates future RMDs and allows tax-free growth.
Use a Withdrawal Schedule: A calculated plan—such as withdrawing a fixed dollar amount annually—can help you manage tax brackets and prevent large spikes in taxable income.
Coordinate with Social Security: Aligning your TSP withdrawals with your Social Security claiming strategy can help smooth your income levels across retirement.

Tax Implications of RMDs

Understanding how RMDs impact your taxes is essential. Because RMDs count as ordinary income, they can:

Increase your federal and state income tax liability
Trigger higher Medicare Part B and Part D premiums due to the Income-Related Monthly Adjustment Amount (IRMAA)
Raise the portion of your Social Security benefits that becomes taxable

Planning withdrawals in your early retirement years can reduce your future RMDs and limit the impact on other benefits.

Post-RMD Strategies to Stay in Control

Once RMDs start, you’re required to withdraw the minimum—but you can always take more. However, even after age 73, you can employ strategies to stay in control of your finances:

Withhold Taxes Proactively: You can choose to have federal income taxes withheld from your TSP distributions, making tax time less stressful.
Reinvest Excess Distributions: If you don’t need the RMD for living expenses, you can reinvest the after-tax amount in a taxable brokerage account.
Adjust Investment Allocations: After RMDs begin, consider adjusting your TSP allocations to reduce volatility, especially if you’re withdrawing regularly.
Charitable Giving: Although Qualified Charitable Distributions (QCDs) don’t apply directly to TSPs, rolling your balance to an IRA allows you to make QCDs after age 70½—helping satisfy RMDs while supporting causes you care about.

What Happens If You Don’t Take Your RMD?

Missing an RMD deadline results in a significant IRS penalty. As of 2025, the penalty is 25% of the RMD shortfall. If you catch the mistake and correct it promptly, the penalty may be reduced to 10%.

Avoiding Penalties:

Use automatic withdrawals from your TSP to meet your RMD.
Track your deadlines carefully—especially if you have multiple retirement accounts.
Consider consolidating accounts to simplify your distribution plan.

Coordinating TSP with Other Retirement Accounts

You may also hold IRAs, 401(k)s, or other retirement accounts in addition to your TSP. It’s important to know that RMDs must be taken separately from each account type—you can’t satisfy a TSP RMD by withdrawing from an IRA.

However, consolidating old accounts into a traditional IRA can help simplify your overall withdrawal strategy, as IRAs offer more flexibility in withdrawal methods and beneficiary planning.

Be aware that if you’re still working at age 73 for a federal agency and haven’t separated from service, you may be able to delay RMDs from your TSP. But this doesn’t apply once you retire.

Getting a Head Start in Your 60s

Your 60s are a critical window for retirement income planning. It’s a time to consider your current tax bracket, future RMDs, and how to optimize income sources.

Here’s what to do during this phase:

Evaluate your current and projected tax brackets
Run projections on how RMDs will affect your income at 73 and beyond
Test various withdrawal strategies and timelines
Reassess your TSP investment allocations to match withdrawal needs

The goal is to build a withdrawal strategy that provides sustainable income while minimizing tax exposure and maximizing control over your savings.

TSP Rules You Shouldn’t Ignore

The TSP has its own set of withdrawal rules and forms. For example:

You must make a withdrawal decision by age 73 or your account may be declared abandoned.
TSP allows automatic monthly payments or partial lump-sum withdrawals.
You can transfer your TSP to an IRA at any time to gain more flexibility in managing distributions.

Knowing the rules in advance helps you avoid costly mistakes.

Rethink the “Delay” Strategy

Letting your TSP grow untouched into your 70s isn’t always the smartest move. What feels like a conservative choice could lead to oversized RMDs, higher taxes, and less control in the long run.

Instead, take time now—while you still have full control—to create a plan that meets your financial needs and aligns with your long-term retirement goals. Talk to a licensed professional listed on this website to help tailor your strategy.