I'm afraid I know the answer

As I sit here working on the papers for withdrawal of my TSP account.....I was wondering if there was a loop hole in my thinking. I was planning on starting up monthly payments that would take just over 10 years to empty the account. They take out 20% automatically although you seem to be able to adjust it a little bit if you want. I was trying to keep the withdrawals at a level to keep me in the 15% tax bracket. You can also choose to take it as a single payment. My assumption has always been that if I did that.....this years tax would be big. Am I correct in assuming that they would take the automatic 20% out......and then they would want a bunch more  when doing this years taxes next year?.....thereby putting me in the 39% bracket for this year?

You can also choose to take it as a single payment.

The whole of your TSP or just a single payment for the year (12 times your monthly payment)? 

If it is the whole of your TSP then yes you'd have a huge tax bill for the year. 

If it is one withdrawal equal to an amount to keep you within the 15% bracket for the year then I don't think it matters if you take it out in 12 monthly payments or not.  I would call them to be sure that their withholding is the same for both options (ie 20%)

Yeah...that's what I'm afraid.....huge tax bill. I'm sitting here trying to figure out exactly how much I can pull out monthly without going to the 25% bracket. And then part of me says "to hell with it...pull out a little more".....I would only pay the 25% on  the amount that went over the 15% limit. I'm trying to get my wife off the US taxes by the time she turns 67 (just over 10 years).

When the IRS calculates income.....is it the adjusted gross income, or taxable income? My adjusted gross was a LOT higher last year than my taxable. Which means I wouldn't be able to pull out as much of the TSP as I would like. 

I might just close my eyes and slip into the 25% bracket a little ways to get things done in that 10 year plan.

I think tax is calculated on your taxable income not your AGI.

Take a look at one of your recent 1040's. Your AGI is on line 37 then you have your deductions and the tax is calculated on your taxable income on line 43. (The line numbers are from tax year 2015)

Yeah...that's what I'm afraid.....huge tax bill. I'm sitting here trying to figure out exactly how much I can pull out monthly without going to the 25% bracket. And then part of me says "to hell with it...pull out a little more".....I would only pay the 25% on  the amount that went over the 15% limit. I'm trying to get my wife off the US taxes by the time she turns 67 (just over 10 years).

When the IRS calculates income.....is it the adjusted gross income, or taxable income? My adjusted gross was a LOT higher last year than my taxable. Which means I wouldn't be able to pull out as much of the TSP as I would like. 

I might just close my eyes and slip into the 25% bracket a little ways to get things done in that 10 year plan.

Some tax is calculated on AGI, some after deductions and credits......The US tax on your TSP withdrawal will be calculated using your AGI which is the number on the last line of the first page of the 1040.

Some tax is calculated on AGI, some after deductions and credits......The US tax on your TSP withdrawal will be calculated using your AGI which is the number on the last line of the first page of the 1040.

My AGI was $57,517 for 2015....but $29K of that was Capital gain which won't happen anymore (only my ROTH left to sell).....so I would assume my AGI next year will be just my pension from last year....about $26,500.

Now comes the guessing part for me.....if I were to start taking $5500 a month from TSP ($66,000 a year), will the total be $26K+$66K?.....or $26K + about $53,000 (taking 20% tax off when it gets withdrawn). 26+53 would take me just a little into the 25% bracket.....which is fine with me and empties my account in about 8.5 years which would be great.

My AGI was $57,517 for 2015....but $29K of that was Capital gain which won't happen anymore (only my ROTH left to sell).....so I would assume my AGI next year will be just my pension from last year....about $26,500.

Now comes the guessing part for me.....if I were to start taking $5500 a month from TSP ($66,000 a year), will the total be $26K+$66K?.....or $26K + about $53,000 (taking 20% tax off when it gets withdrawn). 26+53 would take me just a little into the 25% bracket.....which is fine with me and empties my account in about 8.5 years which would be great.

I was a bit wrong before. Your taxable income will be your AGI minus deductions and exemptions. You capital gains will be taxed at a different rate than income and if you stay withing the 15% tax bracket they would not be taxed at all.

Next year you will add pension and IRA withdrawals together (they are both taxed as income), take off deductions and exemptions and that's whet you'll be taxed on.

I was a bit wrong before. Your taxable income will be your AGI minus deductions and exemptions. You capital gains will be taxed at a different rate than income and if you stay withing the 15% tax bracket they would not be taxed at all.

Next year you will add pension and IRA withdrawals together (they are both taxed as income), take off deductions and exemptions and that's whet you'll be taxed on.

*No capital gains in the future.....all of that has been sold. Only the ROTH left to sell, which isn't taxed.

*OK.....add the pension ($26K).....to the IRA/TSP withdrawal. Will the IRA withdrawal  total be before tax? $26K + $66K.........or after tax $26K + $53K? ........or even less than $53K after exemptions etc?

I was a bit wrong before. Your taxable income will be your AGI minus deductions and exemptions. You capital gains will be taxed at a different rate than income and if you stay withing the 15% tax bracket they would not be taxed at all.

Next year you will add pension and IRA withdrawals together (they are both taxed as income), take off deductions and exemptions and that's whet you'll be taxed on.

Good to hear.  After you had contradicted me above I went back looked again at my 2015 return which has pensions and IRA conversions and couldn't see why the TSP would be treated differently, but I've never been a government employee with a TSP so wasn't going to argue otherwise.

*No capital gains in the future.....all of that has been sold. Only the ROTH left to sell, which isn't taxed.

*OK.....add the pension ($26K).....to the IRA/TSP withdrawal. Will the IRA withdrawal  total be before tax? $26K + $66K.........or after tax $26K + $53K? ........or even less than $53K after exemptions etc?

The tax return will show $26K + $66K before tax then the taxable income will be that minus your deductions and exemptions.  The total tax will show and then the tax credits for tax paid (i.e. the 20% withholdings from your TSP) will be deducted  leaving the amount of tax you owe.

The tax return will show $26K + $66K before tax then the taxable income will be that minus your deductions and exemptions.  The total tax will show and then the tax credits for tax paid (i.e. the 20% withholdings from your TSP) will be deducted  leaving the amount of tax you owe.

I started typing something else.....then looked at the question from a different angle. I guess what I am asking......and it would be just an opinion from you or anyone else.....is how much of that TSP could I take out each year and hit the top of the 15% bracket?......which is at $75,900 this year.
1. Pension is rounded to $26,000.
2. I am assuming only getting 2 deductions ($12,700) for my wife and I on the taxes. Not likely anything else worth mentioning.
3. The difference from $26,000 to $76,000(rounded) is $50,000.
4. If I take out $5500 a month($66,000 a year) what of that would count towards that total difference of $50,000?
5. I would lose 20% of the $66,000 ($52,800) immediately to TSP/IRS in taxes....which I would get 5% back on later if I kept the taxes below the 25% threshold......although I am leaning towards going a little ways into the 25% bracket just to drain out this account sooner.
6. Would the end calculation from the $66,000 be..... $66,000 minus tax of $13,200 ($52,800) minus 2 deductions $12,700 ($40,100 total now)??

Would the final total be $26,000+$40,100= $66,100? Jeez.......I'm driving myself nuts here........If that would be about the right total then I could withdraw around $6,000 a month and still stay under the 25% bracket.

Now I've confused myself........

Google "Taxcaster" which a free tool from TurboTax and run the numbers. I would do it for you but I'm on my iPhone waiting for a flight to England.

I thought you would be in the air by now........

Yeah......I'll go back and have another try tomorrow after golf.