Q. I am currently a GS-9, Step 1. So let’s say that when I retire, I would be a GS-15. How will my Thrift Savings Plan withdrawals be affected by the tax bracket based on my current 15 percent and, let’s say, 28 percent.
A. Your TSP withdrawals will not be affected by your tax bracket. Your tax bracket may be affected by your TSP withdrawals, however. When you withdraw money from TSP, the amount withdrawn during the year is added to your gross income for that year. It is considered ordinary income. If you withdraw enough money to increase your total income to the point where it puts you in a higher tax rate bracket, you will pay a higher marginal income tax rate on the money that is in the higher bracket. This is not a tax education forum, so I’m not going to start running through hypothetical examples. If you don’t understand what I’m talking about, I suggest that you visit a tax preparer to help you with your return.