Key Takeaways
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Missing your Required Minimum Distribution (RMD) deadline from the Thrift Savings Plan (TSP) in 2025 can result in a penalty of up to 25% of the amount you failed to withdraw.
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The IRS may reduce this penalty to 10% if you correct the mistake in a timely manner and submit a reasonable cause explanation.
Understanding the TSP RMD Rule in 2025
If you’ve reached the age when RMDs are mandatory, and your TSP balance remains untouched past the deadline, the IRS won’t let it slide. Starting in 2025, you must begin taking RMDs from your TSP account by April 1 of the year after you turn 73. For example, if you turned 73 in 2024, your first RMD is due by April 1, 2025. Every subsequent RMD must be withdrawn by December 31 of that same year and annually thereafter.
Why Are RMDs Mandatory?
RMDs serve as a way for the federal government to begin taxing deferred retirement income. Since TSP accounts are generally funded with pre-tax contributions, withdrawals are subject to ordinary income tax. The IRS mandates these distributions to ensure they eventually collect tax revenue.
Who Needs to Take RMDs in 2025?
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You if you’re 73 or older in 2025.
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You if you’ve separated from government service and have a balance in the TSP.
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You even if you’re still working beyond age 73 unless you’re a current employee and only have traditional TSP contributions (not Roth).
The IRS Penalty for Missing the RMD Deadline
The consequences of missing an RMD are steep. In 2025, the penalty is 25% of the amount that should have been withdrawn. This can reduce to 10% if the shortfall is corrected in a timely manner and you file Form 5329 with a reasonable cause explanation.
How Is the Penalty Calculated?
Let’s say you were required to withdraw $8,000 in 2025 but didn’t take anything out. You could face a 25% excise tax, which equals $2,000. If you catch the error, take the full RMD, and file Form 5329 with an explanation, the IRS might reduce the penalty to $800.
Important Timelines
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April 1 of the year following your 73rd birthday: First RMD due.
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December 31 each year after: All subsequent RMDs due.
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Tax filing deadline (typically April 15): Deadline to file Form 5329 to request penalty reduction.
How to Correct a Missed RMD
If you’ve missed a required withdrawal, quick action is essential. Here’s what you should do:
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Take the RMD immediately. Make sure to withdraw the full amount.
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Calculate the shortfall and potential penalty. The amount not taken becomes the basis for the excise tax.
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File IRS Form 5329. On this form, you can request a waiver of the penalty by checking the appropriate box and attaching a reasonable cause letter.
What Counts as a Reasonable Cause?
The IRS may waive the penalty if you explain your situation clearly and demonstrate that you:
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Were unaware of the RMD rule,
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Faced serious illness or incapacitation,
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Relied on incorrect professional advice,
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Took steps to correct the mistake quickly once discovered.
There’s no guarantee the IRS will grant the waiver, but they often do when explanations are genuine and timely.
What If You Have Multiple Retirement Accounts?
RMDs must be calculated separately for each retirement plan you own. For TSP, the rule is very specific:
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You cannot satisfy your TSP RMD by withdrawing from another IRA or 401(k).
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Likewise, taking an RMD from your TSP does not cover RMDs required from other non-TSP accounts.
Coordination is essential to avoid IRS penalties across multiple accounts.
Special Considerations for Roth TSP Balances
If you have a Roth balance in your TSP and you’re subject to RMDs, the rule has changed. As of 2025, Roth balances in employer-sponsored plans like the TSP are no longer subject to RMDs. However, this only applies if your Roth TSP balance is still in the account and not rolled over to a Roth IRA.
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Roth IRA: No RMDs at any age.
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Roth TSP: No RMDs as of 2025, but confirm this status hasn’t changed in TSP updates.
This change reduces confusion but still requires clarity on where your funds are held.
How the TSP Helps You Avoid Missing RMDs
TSP tries to make compliance easier by automatically calculating and issuing your RMDs each year. However, you remain ultimately responsible for:
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Ensuring the withdrawal amount is accurate.
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Confirming the funds were actually disbursed.
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Keeping updated personal and tax information on file.
If you don’t receive your RMD on time due to a delay in your response or incomplete paperwork, the IRS won’t accept that as an excuse.
Tax Implications of Taking RMDs
RMDs are considered taxable income for the year in which they’re taken. Here’s how they may affect your taxes:
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Could push you into a higher income tax bracket.
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May increase the taxable portion of your Social Security benefits.
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Could lead to higher Medicare Part B and Part D premiums (known as IRMAA).
Even though RMDs are required, it’s worth consulting a tax advisor or licensed professional to discuss timing and strategy to reduce the overall impact.
How to Plan Ahead So You Don’t Miss It Again
Preventing future RMD mistakes involves some practical steps:
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Set calendar reminders for December 1 and April 1.
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Update your TSP account settings to ensure you’re opted in for automatic RMDs.
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Verify your personal information to avoid mailing or banking errors.
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Coordinate with a financial professional to help you track required distributions across all retirement accounts.
In many cases, missing the first RMD is a result of not understanding the rule rather than outright neglect. Awareness and preparation can go a long way in avoiding costly mistakes.
Staying Compliant and Avoiding IRS Trouble
Missing your TSP RMD once can be a painful lesson. Missing it multiple times is even worse. The IRS can impose penalties each year you fail to withdraw the correct amount. Multiple offenses may raise red flags that invite audits or stricter enforcement.
Keeping detailed records of each RMD withdrawal — dates, amounts, and confirmations — helps you stay protected.
If you’re uncertain, it’s safer to take the distribution and pay the taxes than risk a penalty that might cost even more.
Keeping Your Retirement Plans on Track
Even the most well-prepared government employee can overlook an RMD deadline. It’s not a matter of irresponsibility — often, it’s just complexity. But you don’t have to go it alone. Working with a licensed professional listed on this website can help ensure your retirement plan stays compliant and your TSP works to your advantage, not against it.
