By Mike Miles
July 24th, 2012 | Uncategorized
Q. I will retire this year at age 70 and will request one on the following: 1.) monthly payments for 10 years or more, or 2.) monthly payments based on the Internal Revenue Service’s life expectancy table. My withholding rate will be the same as if I were married with three children but at what tax percentage? Let’s say my annual payout is $10,000. What is my annual tax liability as it pertains to Thrift Savings Plan payments? Will I be paying less than 10 percent?
A. The default withholding rate is not fixed and will depend upon the amount of the distribution. You can use the instructions in IRS Circular E (http://www.irs.gov/publications/p15/ar02.html#en_US_2012_publink1000254686) to estimate the default withholding rate for your monthly withdrawals. You should note that you may request a high or lower withholding rate, or waive the withholding altogether. Also, keep in mind that withholding and your tax liability are two separate things.