Partial Disbursements?

[jimnv_100]

I have been retired for nearly 5 years. Age 67 and have something north of 550K in the TSP. I am currently withdrawing a monthly of 2K and my account keeps growing slow and steady so I feel ok about how my conservative investments have been. Not making a million, but with 3 other income streams, I'm in pretty good shape. Question: I would like to withdraw a partial distribution of around 20K for a trip overseas. How much can I expect to be taxed on that amount? I cannot find any suitable information, but I did find something on the TSP site that I may pay 12% plus whatever that would do to increase my annual taxes because of a "pay raise" for the year.

Thanks for any help on this.

 

[tsptalk]

Hi Jimnv.

I believe 20% is the default. You can request more, but not less.

Thanks for joining us, and have a great weekend!

 

[James48843]

I have been retired for nearly 5 years. Age 67 and have something north of 550K in the TSP. I am currently withdrawing a monthly of 2K and my account keeps growing slow and steady so I feel ok about how my conservative investments have been. Not making a million, but with 3 other income streams, I'm in pretty good shape. Question: I would like to withdraw a partial distribution of around 20K for a trip overseas. How much can I expect to be taxed on that amount? I cannot find any suitable information, but I did find something on the TSP site that I may pay 12% plus whatever that would do to increase my annual taxes because of a "pay raise" for the year.

Thanks for any help on this.

How much you need actually depends on what your total income bracket tax rate is. Earlier I just went with whatever the default was- it turned out my first year of filing taxes with that, that I was short and had to pay out more.

Nowadays I set those kind of “chunk” withdraws with a 22% withholding - and that about hits it right for me. You can alter the amount or rate of federal tax withholding on the TSP’s website during the distribution request.

Your amount depends on your tax bracket when you file.

 

[jimnv_100]

Thanks for the replies. I think what I'm picking up here is holding back around 4500.00 for taxes is probably the safe play for that amount. I'm not the savviest when it comes to taxes, finances, etc. so, any kind of advice I can get is appreciated.

 

[papahotel66]

Thanks for the replies. I think what I'm picking up here is holding back around 4500.00 for taxes is probably the safe play for that amount. I'm not the savviest when it comes to taxes, finances, etc. so, any kind of advice I can get is appreciated.

Be advised they do not withhold state taxes. I always add 5% for the State of Georgia and pay quarterly estimated tax.

 

[Boghie]

Add the $20K to last years taxable income (we use TurboTax, but you can do this with anything). That will get you extremely close to what that $20K will cost you in tax. You will actually end up requiring a little less tax because the brackets and the standard deduction is adjusted for inflation.

If you had your taxes prepared they generally provide a marginal tax rate. That is the tax\gross. You can use that as a multiplier and get close.

You can do the same for state taxes.

I would probably do this because yanking out $20K is not trivial and may bump you over the 10% under withholding buffer. If you end up under-withholding it's not a big deal. If it is a large amount you beg forgiveness - and, it will generally be accepted unless you routinely under-withhold. Worst case is a rather tiny fine that many accept anyway - they accept the fine because they feel they can earn more with the money than the cost of the fine.

 

[jimnv_100]

Add the $20K to last years taxable income (we use TurboTax, but you can do this with anything). That will get you extremely close to what that $20K will cost you in tax. You will actually end up requiring a little less tax because the brackets and the standard deduction is adjusted for inflation.

If you had your taxes prepared they generally provide a marginal tax rate. That is the tax\gross. You can use that as a multiplier and get close.

You can do the same for state taxes.

I would probably do this because yanking out $20K is not trivial and may bump you over the 10% under withholding buffer. If you end up under-withholding it's not a big deal. If it is a large amount you beg forgiveness - and, it will generally be accepted unless you routinely under-withhold. Worst case is a rather tiny fine that many accept anyway - they accept the fine because they feel they can earn more with the money than the cost of the fine.

Boghie: "If you had your taxes prepared they generally provide a marginal tax rate. That is the tax\gross. You can use that as a multiplier and get close."

Not sure what you mean by that. As mentioned, I am not that savvy with the whole tax world and its machinations. Ask me to repair and RTS NAVAIDS and radar systems, I'm your guy, or rather, was...lol. I live in a state tax free state. I have my taxes done by a pretty good tax preparer. We are going to meet up with them in a few weeks and I can ask about what you stated. Would still love to see an example of what you meant if you could be so kind. Thanks for the response and be well!