Q. I am taking the Voluntary Early Retirement Authority from the Postal Service and am trying to decide how to withdraw funds from my Thrift Savings Plan. I have about $300,000 in my account and have a mortgage of $150,000 with about 10 years until payoff. Should I take a lump sum and pay off my mortgage and keep the remaining money in TSP? Or should I just start withdrawing approximately $2,000 monthly to cover mortgage payments? I am afraid if I pay off my mortgage, the tax hit would be to great.
A. I suggest that, as long as your mortgage interest rate is competitive, and unless you can find a good reason to do otherwise, you should make the payments and minimize the withdrawals from your TSP. You might even consider refinancing your mortgage into a 30-year fixed rate, if possible, to reduce your payments and further protect your TSP balance.