In this video, you’ll learn about the different Thrift Savings Plan withdrawal options and the tax implications of those options.
⏰ Timecodes
0:00 – Intro
0:42 – Distribution Sources
1:37 – Installment Payments
3:16 – Single Distribution
3:55 – Life Annuity
5:00 – TSP Tax Reporting
6:03 – TSP Withdrawal Taxes
9:01 – TSP State Tax Planning
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The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees and members of the military. One of the most important aspects of the TSP is how the withdrawals are taxed when you decide to start taking distributions. There are several different TSP withdrawal options and understanding how they are taxed can help you make informed decisions about your retirement income.
The TSP offers several different withdrawal options depending on your needs and preferences. You can choose to take a single payment or set up regular payments over time. You can also choose to continue investing your TSP funds even after you start taking withdrawals.
If you take a single payment from your TSP, it will be subject to federal income tax. The amount of tax you pay depends on your income level and other factors, such as deductions and exemptions. The TSP will also withhold 20% of the distribution for federal income taxes, which can be a significant amount for larger withdrawals.
If you choose to take regular payments from your TSP, they can be either a fixed amount or calculated based on your life expectancy. The fixed payments will be subject to federal income tax just like a single payment, but the amount of tax you pay may vary depending on how much you withdraw each year.
If you choose to take payments based on your life expectancy, the payments will be spread out over a longer period of time, which can help reduce the amount of taxes you pay each year. These payments are calculated based on your age, so the older you are, the higher your payments will be.
Another option for TSP withdrawals is to purchase an annuity. An annuity is an insurance product that provides regular payments for a set period of time or for the rest of your life. Annuities can be a good option for people who want a guaranteed source of income in retirement, but they are often subject to high fees and may not offer the same level of flexibility as other TSP withdrawal options.
When you start taking TSP withdrawals, it’s important to keep track of how much you withdraw each year and how much tax you pay on those withdrawals. You may be subject to penalties if you withdraw too much too soon or if you don’t take your minimum required distributions each year.
In conclusion, the TSP offers several different withdrawal options for federal employees and members of the military, but each option is subject to federal income tax. Understanding these taxes and how they affect your retirement income can help you make informed decisions about your TSP withdrawals and ensure that you have enough money to live comfortably in retirement.
What percentage of your balance is Required Minimum Distribution?
I’m receiving fixed monthly distribution and I wanted to increase my tax withholding, how/where can I do that? Thanks.
I retired from federal law enforcement at age 52 with over a full 20 years under the law enforcement FERS program. As I understood it, I was exempt from the 10% tax fee for the lump TSP transfer and just had to pay the federal taxes. Is that still correct?
Question…are TSP withdrawals after being taxed at least 20% by the fed reported as income during the next tax filing season once the 1099-R is received?
Awesome information, just hate how the system takes so much of your money. Ppl don't live that long waiting for so call retirement aga is BS.
This may not be related to withdrawing options but close. I got word from TSP that I must take RMDs at 72. So I researched TSP a lot and no where does it ever state that TSP is like a 401k or similar to a IRA. It always state TSP is a Government Saving Account with tax saving while employees are working. The only reason I questioned the RMDs was that, if I do have to take RMDs, could I claim a QCD to reduce the taxes. TSP web site has nothing about this or give me the option to have my RMD mailed to an organization eligible to receive tax-deductible contributions. The options I have is (1) start withdrawing the RMD or more, (2) do nothing and have them mail the RMD it to my home. When I found that YouTube had knowledgeable people about TSP, I thought this may be my source for assistance. Can anyone help?
Thank you for explaining this to us! It is very helpful!
greetings , great video ! I am 53 years old ( not member of special force / military) with 20 years of creditable service at VA . My two question : 1) dose life expectancy installment withdrawal option starting at age of 53( separating at age 53 from government ) cause 10% early withdrawal penalty or it is exempt ? 2) if I would choose fix dollar instalment plan option more > 10 years, would I get 10% early withdrawal penalty or I am exempt ? ( TSP bulletin says people choosing Life expectancy base instalment at ANY age ( < 55 ) when separating from government WILL not get penalized 10 % penalty ( early withdrawal ) I did not see this for FIX dollar withdrawal > 10 years, though in TSP site )
I don't work for the federal anymore, what happens if I take all the money out of my TSP?
I plan to withdraw an entire traditional 401 TSP account when I retire in 5 years and use the distribution to put down for a new house, but am concerned about a big tax bracket % impact when taking out the large balance at once. So, you, on the video, mentioned that if I convert traditional TSP to TSP Roth now (saying small partial for next 5 years to close out the traditional side) and make a first contribution to Roth, therefore, in 5 years later I could take out the whole Roth balance once to use for the down payment since the first contribution in 1st year is the indication of meeting the qualification for no penalty and tax free. Is that correct?
Just so I’m understanding,
I’m eligible for retirement at 48, plain on going at 50. I contribute 9% of my own to Roth and I understand you can’t touch this until 59 1/2 without penalty.
That being said, can I choose to only withdraw from traditional until I turn 59 1/2? Leaving Roth untouched and not penalized.
The TSP is total TRASH. The best thing you can do when you retire is roll over all of your funds into a Vanguard, Fidelity, or any REAL & reputable investment brokerage firm of your choice. Why? The irreversible damage that is being done to retirees RIGHT NOW is incalculable by forcing them to withdraw evenly across all investment funds. In the current market conditions you would want to be making any withdrawals off your G fund ONLY until your stock based funds recover from this (semi-)recession. The TSP will screw you, and don't believe the hype about low fees, you can get the same low fees from numerous funds at Vanguard. If you understood how the TSP was run, by whom, and how they make their money you would be disgusted. The TSP is only good while you are working so you can invest and get the match, when you retire you need to get the hell out of it.
Very nice and informative video. One quick question. What form do I need to fill out to get monthly payment from my TSP account at retirement.
Excellent information to know, as I'll be retiring at the end of the year from the Federal Service. Your channel has been very helpful in my planning. Thank You!
I just came upon your channel by chance and I really enjoyed this first video I have seen. I retired from Federal service on May 31st and am enjoying myself immensely. I feel lucky that I only had a three month wait (September 1st) to receive my full FERS pension annuity and Special Retirement Supplement. I had to navigate the retirement process myself since we had no on site HR to help. Channels such as this are invaluable to those planning to retire. Well done. Great presentation.
Thanks for the great info.