Q. I retired in 2011 and must start required minimum distributions soon. I understand taxation if the Thrift Savings Plan sends me fixed dollar payments or if TSP pays out based on life expectancy. But what if I have TSP buy an annuity with part of my TSP and I leave the balance in the TSP? How are taxes figured?
A. Your annuity income will be taxable as ordinary income and you will be required to take RMD from the remaining TSP balance, which will also be taxed as ordinary income.