Q: I am a federal firefighter with a mandatory retirement at age 57. I plan to retire soon and I plan to completely withdraw all of my Thrift Savings Plan funds and move to a South America with a full withdraw option in one payment. How much of a tax hit can I expect to take by doing this, and is this taxed as ordinary income, as well, for the year?
A: Your withdrawal will not be subject to the early withdrawal penalty, but will be subject to mandatory 20% tax withholding. Funds withdrawn from the TSP are considered ordinary income for tax purposes.