Q. I plan to retire in March 2016. I plan to take all of my TSP money in one lump sum. (I have many debts to pay off, such as student loans.) What are the advantages and disadvantages of taking it all out in one lump sum? How much is taxed (in terms of percentage)?
A. I can’t tell you what percentage of your TSP will be taxable upon withdrawal since I don’t know what the contents are composed of — Traditional, Roth, combat pay. Everything that is taxable will be added to your tax return as ordinary income for the year in which the withdrawal occurs. You may also be subject to the early withdrawal penalty. In the end, the tax you pay on withdrawals each year will depend upon your tax return for the year and the composition of your TSP at the time of the withdrawals. For more information, see the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf and literature at www.tsp.gov. After that, you should consult a competent tax professional for further advice.
