Thinking About Withdrawing TSP to Avoid State Taxes

Managing your TSP and alternate investment options after retirement or separation from service.

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MakeMe$$$$
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Thinking About Withdrawing TSP to Avoid State Taxes

Post by MakeMe$$$$ »

I'm starting to think long term about my TSP holdings. As a full time RVer (homeless, transient tramps) we are SD residents. We are planning on staying on the road for up to 4-5 years longer. Part of the reason we sold the house and moved into our 43' motorhome was to explore the country and find a place to settle down in...definitely NOT Illinois! We think that we are starting to narrow down our search to the general areas Casa Grande, Gilbert & Chandler AZ.

I'm starting to think about a 4-5 year plan to slowly draw down my TSP while we SD residents since SD has no income tax. If I am understanding this correctly, if I wait until I become an AZ resident then my TSP is subject to AZ income tax. It appears AZ does NOT tax SS but does tax all other retirement incomes.

My first goal is to keep withdrawals low enough to not push my income beyond my current top tax margin. The second goal is to avoid state income tax. Of course, I would reinvest withdrawals.

Any thoughts on this plan or alternatives?
Don
Rolled over to Fidelity 2/24/18.
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md2018
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by md2018 »

Move to Florida, we don’t have a state income tax and lots of RV parks. During the summer and hurricane season drive back to SD.

mindofmush
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by mindofmush »

Do you have to give up your SD residency if you park in AZ too long? Or did you want to settle down in AZ eventually?

6 other states that don't have income tax AK, FL, NV, TX, WA & WY
mo meng, mo ching (which loosely means: no money, no life)

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MakeMe$$$$
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by MakeMe$$$$ »

md2018 wrote:Move to Florida, we don’t have a state income tax and lots of RV parks. During the summer and hurricane season drive back to SD.
We don't own any property in SD. SD is set up to allow folks like us to set up domicile with as little as proof of staying in SD 1 night. This is good for up to 5 years of residency at which time you repeat the process.

We spent a winter in the Lakeland area and enjoyed it but we aren't a fan of the summer humidity. That being said, we haven't totally ruled FL out but we lean towards AZ.
Don
Rolled over to Fidelity 2/24/18.
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MakeMe$$$$
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by MakeMe$$$$ »

mindofmush wrote:Do you have to give up your SD residency if you park in AZ too long? Or did you want to settle down in AZ eventually?

6 other states that don't have income tax AK, FL, NV, TX, WA & WY
We "renew" our SD residency when we renew our driver's licenses. The plan (still not written in stone) is to eventually buy a place in AZ and call it home.

We spent 2 winters in the McAllen, TX area and then a year in FL. TX is just not my style and while it doesn't have a state income tax, it gets you in other ways. FL...we just aren't sure we want to be there come summer time. AZ isn't necessarily that much better but we have seen enough of the hot, dry summers to find it workable.

Anyway...I don't want to give AZ any of my TSP money if I can avoid that.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

Midway
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by Midway »

Pick your poison. A friend moved from Texas (no income tax) to New Mexico ( income tax) because TX property taxes were so high. He came out better paying income tax and property tax in NM. If you like nice weather, Hawaii does not tax your federal pension or Social Security, but will tax your TSP.

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wwwtractor
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by wwwtractor »

https://www.kiplinger.com/slideshow/ret ... index.html

We have been looking at motorhomes as I plan to retire 12/31/2017.
We may rent to see how it goes for a little while and decide on the level of RV. We have looked at 3 used ones in the 30 foot range so far.

Any advice on Rving is welcome. You can email if you like.

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Jesrich
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by Jesrich »

Buy a winter home for AZ while maintaining your SD residence. Who says you can't stay a SD resident?

We are SD residences too btw (military).
1st IFT Jul 10,17

PIP-end of 2nd qtr 2017 was 18.46%
PIP-end of Dec,17 23.4%
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PIP-end of Feb,18 14.25%
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DSS
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by DSS »

Have you considered withdrawing from your TSP and converting to a Roth IRA while you are still a SD resident? Keeping your withdrawals low enough to minimise federal taxes of course. Over several years you may be able to convert the entirety of your balance.

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evilanne
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by evilanne »

I like Wyoming...no state income taxes, low sales tax and property taxes are about 1/3rd of Texas. I like the weather in the region between Albuquerque (hot) & Cheyenne (cold) as it is dry with low humidity. Plus for MakeMe$$$$, it is a little bit closer to Arizona than SD.

crondanet5
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by crondanet5 »

Are you currently withdrawing money from your TSP Account?

ksmoly04
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by ksmoly04 »

evilanne wrote:I like Wyoming...no state income taxes, low sales tax and property taxes are about 1/3rd of Texas. I like the weather in the region between Albuquerque (hot) & Cheyenne (cold) as it is dry with low humidity. Plus for MakeMe$$$$, it is a little bit closer to Arizona than SD.
The region evilanne describes is Colorado--300 days of sunshine; perfect summer weather, great skiing, and in Colorado Springs: the snow will be gone in a few days once the sun comes out again. :D

State Income taxes are a flat 4.63%; and property taxes are super low. For an $300K home, current property taxes in the Springs are at most $1,100 depending on which school district you reside in. Expect higher property taxes in the Denver Metro.

I follow the CO details closely as that is where my wife and I will be returning to.
Daily Seasonal Since: August 23, 2017
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Snapdragon
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by Snapdragon »

MakeMe$$$$ wrote: We think that we are starting to narrow down our search to the general areas Casa Grande, Gilbert & Chandler AZ.
Casa Grande is where my husband was based out of to get the drug smugglers. Just sayin'; wouldn't be the top of my list

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MakeMe$$$$
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by MakeMe$$$$ »

crondanet5 wrote:Are you currently withdrawing money from your TSP Account?
Not yet. Just looking into that as a move I would make if reasonable.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

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MakeMe$$$$
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Re: Thinking About Withdrawing TSP to Avoid State Taxes

Post by MakeMe$$$$ »

DSS wrote:Have you considered withdrawing from your TSP and converting to a Roth IRA while you are still a SD resident? Keeping your withdrawals low enough to minimise federal taxes of course. Over several years you may be able to convert the entirety of your balance.
I don't think I can do a Roth since I no longer work. :wink:

I'm certainly looking at how to take my money out to minimize federal tax along with perhaps timing it to avoid state income tax in any state we could settle down to.
Don
Rolled over to Fidelity 2/24/18.
Fantasy still playing with Daily Strategy 12767.

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