Ask The Experts: Money Matters

By Mike Miles

Taxes and TSP

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Q. I understand TSP withdrawals will be taxed as regular income come tax time.
However, when one takes/chooses monthly TSP payments upon retirement, are
taxes taken out of these payments? In other words, when I run the TSP
calculator, understanding it is only an estimate, can I expect these
payments to be lower due to taxes being taken out?

Also, when I run the TSP calculator, using the monthly payment increasing
option, I never seem to run out of money, although if I juggle with the
figures (increase expected age to live), the payments do eventually show a
decrease in payment ($300,000 in TSP, current age 55; age at retirement 56;
age expected to live 85; month born January; 5 percent return; spouse dependent on
TSP monthly income; current spouse age 57). FYI, I will be retiring due
to discontinued service retirement. Can this be true? If so, why would
one need an annuity? Or is the calculator off? I do want a steady
continued stream of income for myself and my spouse (if I die first), but not
sure how much I should take stock in this calculator. I am trying to
decide if I need to go through a TSP annuity in a mixed withdrawal. I am
wanting to take a one-time withdrawal of $50,000, monthly payments, and a
TSP annuity if needed. I understand an annuity is a sure thing for
continued payments. However, according to the TSP calculator, I don’t need
one. I also understand this is an estimate only and will depend on the
comings and goings of the funds, etc. But it appears, according to the
calculator, I have a lot to play with!

A. See Page 3 of the notice at for the rules on TSP tax withholding.

I don’t recommend that you trust the TSP’s calculator for planning purposes. There is so much wrong with it that I believe it does more harm than good. Of course, it’s possible to run your account dry during your lifetime. In fact, you can run it dry with one withdrawal! I suggest you do your own math, or find someone trustworthy to do it for you.

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