RMD Strategy for Federal Retirees: The Age 73 Tax Stack

1. What an RMD is and when it starts

For decades, your Traditional TSP did something remarkable: it grew without the IRS taking a cut. Contributions went in pre-tax, earnings compounded untaxed, and the tax bill sat deferred — waiting. A required minimum distribution is the IRS collecting on that deferral. It’s the rule that says you cannot leave pre-tax retirement money growing untaxed forever.

A sound RMD strategy for federal retirees starts with the basic timeline. Under the SECURE 2.0 Act, required minimum distributions begin at age 73 for anyone born between 1951 and 1959 — which covers essentially every federal employee retiring now and over the next several years. For those born in 1960 or later, the age rises to 75 starting in 2033. For the current wave of federal retirees, 73 is the number.

An RMD is the minimum you must withdraw from a tax-deferred account each year. You can always take more. You simply cannot take less. The requirement applies to:

• Your Traditional TSP balance
• Traditional IRAs, including any IRA you created by rolling over a TSP
• Other pre-tax employer plans

It does not apply to Roth TSP or Roth IRA balances during your lifetime — more on that in section 5.

The penalty for getting this wrong is severe. Miss an RMD, or take too little, and the IRS levies an excise tax of 25% on the shortfall. SECURE 2.0 reduced that from the old 50%, and it drops further to 10% if you correct the error within two years. But even 10% is real money lost for nothing. Miss a $20,000 RMD and the penalty is $5,000 — or $2,000 if promptly fixed. The RMD is not optional, and it is not forgiving.

2. How the RMD is calculated

The RMD formula is simple arithmetic:

RMD = (your account balance on December 31 of the prior year) ÷ (your IRS life expectancy factor)

The life expectancy factor comes from the IRS Uniform Lifetime Table. It’s based on your age, and it gets smaller every year — which means the RMD claims a slightly larger percentage of your balance as you age. A few representative factors:

Two features of that table matter for planning.

The percentage climbs with age. At 73 the RMD is about 3.8% of the balance. By 85 it’s 6.2%, and by 90 it’s over 8%. The RMD is designed to draw the account down over your remaining life expectancy, so the older you get, the faster it empties.

The chart makes the trajectory visible. The RMD doesn’t just continue at 73’s level — it claims a steadily larger share of the balance every year. A retiree who finds the first RMD manageable at 3.8% should plan for it to become a materially bigger draw, and a bigger tax event, through their 80s.

The dollar amount scales directly with the balance. A $250,000 Traditional TSP produces a roughly $9,400 first RMD. A $1,000,000 balance produces about $37,700. A $1.5 million balance — not unusual for a long-career federal employee who maxed the TSP — produces a first RMD near $56,600. For a TSP millionaire, the RMD alone is a substantial income stream, arriving whether it’s wanted or not.

One TSP-specific rule: the TSP RMD must be taken from the TSP. If you also have a traditional IRA, that IRA has its own separate RMD. You can satisfy multiple IRA RMDs by withdrawing the total from any one IRA, but you cannot use an IRA withdrawal to satisfy a TSP RMD or vice versa. Each TSP RMD comes out of the TSP, calculated on the TSP balance.

And critically: a TSP RMD cannot be rolled over. Most TSP distributions can be rolled to an IRA, but the RMD portion never can. The RMD is a taxable distribution by design — its entire purpose is to be taxed. For the broader mechanics of moving TSP money, see TSP rollovers in 2026.

3. The first-year April 1 trap

The single most expensive RMD mistake is a timing trap built into the first year.

Here are the deadlines. For your first RMD — the one for the year you turn 73 — you have until April 1 of the following year. Every RMD after that is due by December 31 of its own year.

That first-year grace period to April 1 looks like a convenience. It is usually a trap. Here’s why: if you defer your first RMD into the following year, you still owe that following year’s RMD by its own December 31 deadline. Both RMDs land in the same tax year.

Consider a federal retiree who turns 73 in 2026 with a $600,000 Traditional TSP balance:

Deferring doesn’t avoid the first RMD — it just shoves it into 2027, where it piles on top of the 2027 RMD. The retiree who defers reports nearly $47,000 of RMD income in a single year instead of splitting roughly $22,600 and $24,300 across two years. That stacked year can push income into a higher bracket, increase the taxable share of Social Security, and — two years later — feed an IRMAA determination.

The first-year RMD deadline of April 1 is not a gift. Deferring the first distribution forces two RMDs into one tax year, stacking the income, inflating the bracket, and feeding an IRMAA surcharge two years downstream. For almost every federal retiree, taking the first RMD on time — in the year you turn 73 — is the right move.

There is one narrow case where deferral helps: if the year you turn 73 happens to be an unusually high-income year and the following year will be much lower, splitting the timing differently might help. That’s rare. The default — take the first RMD in the year you turn 73 — is right for nearly everyone.

4. The age 73 tax stack: how RMDs cause bracket creep

The deeper problem with RMDs isn’t the distribution itself. It’s that the RMD stacks on top of income you already have.

A federal retiree at 73 is rarely starting from zero. They already have a FERS pension. They almost certainly have Social Security. Both are largely taxable, and both are already filling up the lower tax brackets. The RMD then lands on top of that stack — and the dollars on top are taxed at your highest marginal rate.

Walk through a single retiree at 73 in 2026:

• Taxable FERS pension: about $39,900
• Taxable Social Security: about $25,500
• Subtotal before RMD: $65,400
• RMD from an $800,000 Traditional TSP: about $30,189
• Resulting income: roughly $95,600

The pension and Social Security alone had this retiree sitting comfortably in the 12% and 22% brackets. The $30,000 RMD stacks entirely on top — none of it fills the low brackets, because those are already full. Every dollar of the RMD is taxed at 22% or above. And because the RMD raises total income, it can also pull a larger share of Social Security into the taxable column and, two years later, lift the retiree toward an IRMAA threshold.

This is the age 73 tax stack: pension, plus Social Security, plus a mandatory TSP withdrawal that grows as a percentage every year, all compounding into a tax bill that often rises in a retiree’s late 70s and 80s rather than falling.

The bracket creep is the reason RMD planning has to start years before 73 — which is the entire premise of the next article in this pillar, on the Roth conversion window.

5. Why Roth TSP is now RMD-exempt

One major change has reshaped RMD planning for federal employees: Roth TSP balances are no longer subject to RMDs.

Before 2024, the Roth TSP was subject to lifetime RMDs — an oddity, since Roth IRAs never were. Retirees routinely rolled their Roth TSP to a Roth IRA purely to escape the RMD requirement. SECURE 2.0 fixed this. Effective in 2024, Roth balances in the TSP are no longer subject to RMDs during the participant’s lifetime.

The practical consequences are significant:

• Your RMD is calculated only on your Traditional balance. If your TSP is split between Traditional and Roth, only the Traditional portion enters the RMD formula. A retiree with a $500,000 Traditional and $300,000 Roth balance calculates the RMD on $500,000 — not $800,000.
• Only Traditional distributions count toward satisfying the RMD. Pulling money from the Roth side does not reduce your required Traditional distribution.
• The Roth TSP can now be left untouched to grow tax-free for your entire life, then passed to heirs — a genuine estate-planning advantage that didn’t exist before 2024.

This change removes what used to be a standard reason to roll the Roth TSP out to a Roth IRA. The RMD-avoidance motive is gone. There can still be other reasons to prefer a Roth IRA — broader investment choices, consolidation — but escaping RMDs is no longer one of them. For the full comparison, see Roth vs Traditional TSP in 2026.

The larger lesson: every dollar that sits in Roth rather than Traditional is a dollar that never generates an RMD. The Roth/Traditional balance you build during your working years directly determines the size of the tax stack you face at 73. That’s not a coincidence — it’s the whole reason the Roth-versus-Traditional decision matters.

6. The TSP “still working” exception

There’s one way to legally delay TSP RMDs past 73, and it’s specific to people still on a federal payroll.

If you are still employed by the federal government at age 73 and have not separated from service, you can delay RMDs from your TSP until the year you actually retire. This is the “still working” exception, and it applies to the TSP because the TSP is an employer plan.

Two important limits:

It does not apply to IRAs. Traditional IRAs require RMDs at 73 regardless of employment status. A 74-year-old still working for the government can defer their TSP RMD — but if they also have a traditional IRA, that IRA’s RMD is still due. This is one more reason to think carefully before rolling a TSP into an IRA: the rollover converts a balance that could be RMD-deferred (if you keep working) into one that cannot.

It only delays — it doesn’t erase. When you finally retire, RMDs begin. If you retire at 76 after using the exception, your first TSP RMD is due by April 1 of the year after you separate. The same first-year trap from section 3 applies — take it on time, in the year you retire, rather than deferring it into a double-RMD year.

For most federal retirees this exception is academic — they’ve already retired before 73. But for the growing number of federal employees working into their mid-70s, it’s a real and useful tool. Federal Warrior covers the broader picture of working past your minimum retirement age ↗ and what it does to your benefits.

7. RMD strategy: what to do before and after 73

A good RMD strategy for federal retirees operates in two phases — the years before 73, and the RMD years themselves.

Before 73 — the years that actually matter most. The RMD itself isn’t very flexible. What is flexible is the size of the Traditional balance you bring into age 73. Everything you do between retirement and 73 to reduce that balance reduces every future RMD.

• Roth conversions in the gap years. Converting Traditional TSP or IRA money to Roth during your 60s — when your income may be at a lifetime low between your last paycheck and your first RMD — moves money out of the RMD-generating bucket permanently. This is significant enough to be its own article: see the Roth conversion window.
• Drawing Traditional down early. Spending from the Traditional TSP in your 60s, even if it means voluntarily realizing income, can be better than letting the balance grow into much larger forced RMDs at 75+. Filling up the 12% bracket deliberately at 65 beats being forced into the 24% bracket at 80.
• Building Roth during your working years. The earlier lever still: every working-year dollar directed to Roth TSP instead of Traditional is a dollar that never produces an RMD.

During the RMD years — managing the stack.

• Take the first RMD on time, in the year you turn 73, to avoid the double-RMD trap.
• Use Qualified Charitable Distributions. If you’re charitably inclined, a QCD lets you send up to $111,000 in 2026 directly from a traditional IRA to a qualified charity. The amount counts toward your RMD but is excluded from taxable income — one of the few ways to satisfy an RMD without the tax hit. Note this works from an IRA, not directly from the TSP, so it can be a reason to roll a portion of TSP to an IRA.
• Coordinate the RMD with your other income. Because the RMD is fixed, manage the income you can control around it — the timing of additional discretionary withdrawals, capital gains realization, and Roth conversions — to keep total income under the bracket and IRMAA thresholds that matter.
• Reinvest what you don’t need. An RMD you’re forced to take but don’t need to spend can be moved straight into a taxable brokerage account. You’ll owe tax on the distribution, but the money stays invested and keeps working.

The through-line: the RMD years are largely set by decisions made before them. A federal employee who reaches 73 with a balanced mix of Traditional and Roth, and a Traditional balance deliberately drawn down through the gap years, faces a manageable tax stack. One who reaches 73 with everything in Traditional TSP faces the full force of the age 73 tax stack with very few levers left to pull.