I hope I am in the correct forum. When I retire and cash in my TSP account does anybody know what tax rate would apply. Would I pay an income tax or a capital gains tax ?

Thanks any and all in advance.

Dennis

you will pay regular income tax. There are other options on retiring, you don't have to take all of your money out you could roll it into an IRA, buy an annutity, have a monthly withdraw or simply keep it there. ( of course without new contributions) the best bet is to talk to a financial advisor about 2 years before you make a decision because once you decide you sort of have to stay with it.

Consider too, your health insurance. I think you have to remain in the
gov. retirement annuity if you want to continue your current Gov. health insurance plan. I'm not sure about it but I'm thinking that is the case. If I think about it, I'll look deeper into it and get back with you. Maybe someone knows more and can pass it on.

No you don't. all you have to do is have it 5 years prior to your retirement date and continue to pay your share. the gov will continue to pay their share until you either stop paying or you croak!

seco is correct, the same goes with life insurance. Also another thing about health insurance is that if you have a spouse or children that you want covered into retirement you need to be enrolled in the self and family option five years prior to retirement.

Thank you all. It looks like 5 years is the time frame when one should
seriously begin planning ones retirement.
Thank you for the info seco. Mind a few more tax questions ? I know I
could probably look this up but
you seem to have this knowledge at the tips of your fingers.

1) Can I take monthly withdrawals from TSP ?

2) If I cash in my TSP and buy an annuity would I pay income tax
on the initial withdrawal or the subsequent monthly payouts from such annuity ?

3) A rollover to a IRA is tax free is it not ?

Thanks again
Dennis

Couple of comments. A-Fed, it's Self or Family. Not Self and Family. I know this because I was a dependant on my spouse's FHB plan. When my son was no longer covered by the Family plan my spouse and I opted for Self Coverage. Even though my Self coverage will be for 4 years by the time I retire, I get credited for the time enrolled as a dependant on my Spouse's Family plan.

Veteran: 1. Yes. You can take a monthly quarterly, or yearly distribution

2. If you enroll in the annuity plan (NOT RECOMMENDED) offered by TSP (Met Life) you are not taxed on the withdrawal (transfer to annuity). The annuity distributions are taxable.

3. Yes. But make sure it's a rollover (ie: transfer of funds). If you withdraw the funds you must roll it over into an IRA within 60 days. TSP will withhold 20% before releasing the funds to you. If a financial institution (ie: Vanguard Mutual, ScottsTrade, etc), requests a transfer of funds for an IRA account, the TSP will release 100% of your money. MAKE SURE the requesting institution sends the TSP Form 70 as they will not accept an IRA Rollover form from any financial institution.

I personally belive that the best bet is to wait as long as you can and then when the market is high transfer your TSP to an IRA this way you could manage your money (example: make large witdraws, small timely withdraws, change at any time the amount or frequency of your withdraw, invest one day in walmart and the next in microsoft, ect....) Remember that you must be over 59 1/2 to take money out, but as long as you have a full retiriment (law enforcement, firemen) you can roll it to an IRA or purchase an annuity.

Sorry Jeffvan1 is right I misstated the eligibilty off the cuff. It is self OR family, the following link should clear up any confusion … OPM gives some examples according to your situation.

http://www.opm.gov/insure/health/reference/handbook/fehb21.asp#Service