Ask The Experts: Money Matters

By Mike Miles

Disability and tax deduction from TSP funds

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Q. I recently retired from the federal government due to becoming permanently disabled at age 61. I received my disability approval from the Social Security Administration. I withdrew a portion of Thrift Savings Plan funds to cover expenses as a result of not being able to work. Why was 20 percent tax deducted from the distribution of funds at age 61 and with the legal purpose of being disabled?

A. Because that is the default federal income tax withholding rate for the distribution. The money has been applied toward your tax liability for the year.

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