State tax liability


Correction: A previous version of this post misidentified the the tax-exemption characteristic of a Traditional IRA. This post has since been corrected to explain a Traditional IRA is not tax-exempt.

Q. I’m retiring at 50 years of age after 22 years in federal law enforcement. I’m considering withdrawing all my TSP funds to a financial institution under a tax-exempt traditional IRA. I understand there’s no federal tax liability; however, I reside in the state of California. Is there a state tax liability for the withdrawal?

A. If you roll your TSP assets over to a Traditional IRA (which is not tax-exempt, by the way), your tax liability on those assets will continue to be deferred until withdrawn. I generally recommend against doing this unless there is a good reason to do so, however.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

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