TSP withdrawal and taxes


Q. My husband and I are federal retirees (both 65). We are buying a second home. We are contemplating withdrawing our down payment (50 percent; $130,000) from our Thrift Savings Plans. We are trying to determine the best way to handle the tax issue. Does it make more sense taxwise to withdraw a large amount (130,000) and incur the 20 percent tax hit, or make a lower down payment (20 percent; $52,000) and request an annuity of $1,000 per month, thereby reducing our yearly tax liability? We are currently in the 25percent tax bracket.

A. The only way to answer this question responsibly is to prepare pro forma tax returns for each option and compare the results.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

1 Comment

  1. The TSP online loan calculator is wrong!! I called the TSP and a rep said the calculator was fine. I said there were errors in some of the calculations and asked to speak to someone higher up. I didn’t get his name, but he agreed the figures given by the loan calculator were wrong. Millions of people use this calculator daily. The numbers are unreliable and the guy promised to review and look into it and get back to me. THEREFORE, DO NOT RELY ON THE ONLINE TSP LOAN CALCULATOR TO GIVE YOU ACCURATE NUMBERS UNTIL THE REVIEW IS COMPLETED AND THEIR ONLINE CALCULATOR IS COMPLETELY FIXED!! Let others know.

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