Q. I have retired from federal service at the age of 56, with 30 years of service under my belt. I am under the FERS retirement. I have $329,000 in my TSP account. I want to withdraw equal monthly payments from my TSP account of $1,250 per month. Will this scenario be taxed as normal income, or will I be subject to the 20 percent tax rate?
A. Since your payments are expected to continue for 10 years, or more, you may adjust the tax withholding to your liking — including waiving it altogether. The gross amount of your distributions will be added to your tax return for the year as ordinary income, and taxed as such. Tax withholding and tax liability are two different things.