Q. I will be 61 when I plan to retire with 38 years in service under CSRS the entire time. I am not counting on the TSP as part of my retirement and plan to use the money for home repair, paying certain loans, etc. What penalty/tax percent will I incur? I was planning on retiring in December, but January might be better for taxes on less income received.
A. You will not be subject to the Early Withdrawal Penalty since you will retire during or after the year in which you reach age 55. The TSP will withhold 20 percent of the distribution amount and deposit it against your federal tax liability for the year of the withdrawal. The amount that you actually owe for the distribution will be determined when you file your tax returns for the year. See the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for more information about the taxation of distributions from your TSP account.