Q. I plan on retiring in 30 days. When I decide to draw my money out of the TSP, full withdrawal with monthly payments, am I taxed only on the monthly payments? And can I change fund allocation after I make a full withdrawal with monthly payments?
A. Every dollar that is withdrawn from your TSP account and not rolled over will be considered ordinary income for tax purposes in the year in which it is constructively received. You may continue to manage your account balance as usual, including making changes to your account asset allocation, while you are receiving monthly payments.