Q: I plan to retire at the end of November 2011 with about $230,000 in my TSP. I need to withdraw about $25,000 to pay off a loan and I plan to transfer the remainder to an annuity. I understand the tax bite on the withdrawal will be about 20 percent. Would it be to my benefit to wait until after Jan. 1, 2012, to withdraw the $25,000 because I will be in a lower tax bracket as opposed to 2011 or does it matter?
A: It might be. The answer will depend upon your specific circumstances and what happens to the tax code between now and then. The first step is to have your tax preparer prepare pro-forma tax returns for 2011 and 2012 to see the potential cost or benefit of waiting. Then weigh this information against the after-tax cost of delaying the repayment of the loan.
