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Thread: Tax Percentage Applied To A a Complete TSP Withdrawal

  1. Default Tax Percentage Applied To A a Complete TSP Withdrawal

    Would someone kindly provide information/clarification regarding the Tax percentage that will be applied when I withdraw my entire TSP Balance. I am 66 years old and SINGLE. Based on the fact of being SINGLE, TSP's regulations/rules state I will be taxed as MARRIED with three (3) deductions (children). If that is the case, in a scenario where my TSP Balance is $200,000.00 would I pay 20% in taxes ($40,000.00) and expect to receive a lump sum payment of $160,000.00? Whatever help you can provide will be greatly appreciated!! Thank you ALL.


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  3. #2

    Join Date
    Feb 2007
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    San Diego, CA
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    Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    The standard is Married with 3 kids, but you can reduce the withholding by filling out the section to the level you want.

    Read through the documnet carefully.
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  5. Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    This is what I'm wondering too, I've been told after taking out all that tax money off the top, then you get taxed on it again as added income when you file your taxes, anyone done this?


    Sent from my iPhone using TSP Talk Forums

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  7. #4

    Join Date
    Jul 2016
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    Texas
    Posts
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    Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    Single with AGI between $191K & $416K, marginal tax rate is 33%. Taxes will be $46,643.75 + 33% for AGI > $191,650 for 2017
    Depending on your other income and deductions, I would consider changing the tax withholding to single with fewer deductions to increase the withholding to avoid tax penalty for underpayment or be prepared to file estimated taxes. Another alternative would be to take payments so that it is paid out over a longer period rather than all at once, putting you in lower tax bracket.

    It is also advisable to check with CPA or Tax Preparer to determine a withdrawal strategy. You can increase withholding, see table in "Important Tax Information About Payments From Your TSP Account". If you use a tax program to prepare your taxes, you may want to run the numbers in last year's program to see how your taxes would be impacted based on other anticipated income (pension, SSA, etc.) Your TSP distribution will be reflected on a 1099R.

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  9. #5

    Join Date
    Apr 2008
    Location
    Cleveland, Ohio
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    8,189

    Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    Quote Originally Posted by futurecoach View Post
    This is what I'm wondering too, I've been told after taking out all that tax money off the top, then you get taxed on it again as added income when you file your taxes, anyone done this?


    Sent from my iPhone using TSP Talk Forums
    So if you make $100,000 in 2017 the $200,000 lump sum will make your total income $300,000 of which you will be taxed at the 33% rate. Yes, you would be paying additional taxes on your $200,000 lump sum because of your total income & the TSP taxes withheld (which is lower than 33%).
    May the force be with us.

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  11. #6

    Join Date
    Jun 2004
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    Boiled Peanut, Georgia, USA
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    47,499

    Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    Wait for the Trump Tax Cuts!
    Links Crude Settle $46.44 08-29-2017
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  13. #7

    Default Re: Tax Percentage Applied To A a Complete TSP Withdrawal

    One approach to a complete TSP Withdrawal is to make an election to make a complete withdrawal by making monthly withdrawals over a significant time period. For tax purposes you would want to elect a monthly amount which keeps your rate of taxation at the lowest possible rate. i.e. if you can receive 10,000 and keep your tax rate under 15% great and wonderful. Pulling all of your funds out in a lump sum is probably the most expensive way for tax purposes. Another consideration is the RMD requirement to calculate and take out funds once you reach 70 1/2. Consider whether to wait until 70 1/2 to start withdrawing funds (larger taxable amount with a potential higher tax rate and cost) or to start withdrawing funds earlier than 70 1/2 which should lower your tax cost assuming you believe tax rates are likely to increase in the future. This is certainly a personal decision and not to say I have all the answers but my call was to start at age 62 (retirement year) withdrawing my TSP account 4% a year over a significant time period. So far I have managed to keep my tax rate on my TSP account withdrawals under 15%. You can change the withdrawal amount annually. JMHO Good luck fellow TSP'rs!

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