Ask The Experts: Money Matters

By Mike Miles

Withdrawing from TSP

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Q: I am 62 years old and will retire this year under the Civil Service system after 41 years. I want to take all of my TSP out to pay off my second trust on my home this year. I was told when I withdraw my TSP I will pay a 26 percent withdrawal tax. Will I also have to pay an income tax on that money when 2011 income taxes become due?

A: Your withdrawal will be subject to 20 percent tax withholding, which will be applied as a credit against your tax liability when you file your tax return for the year.

Comments

  1. Gary Says:
    April 28th, 2011 at 7:11 am

    Seems u left out another option a transfer to an IRA account. You don’t pay the 20 per cent.