Most federal retirement income is taxable, and that includes more sources than many retirees expect. FERS pensions are taxed as regular income, and Social Security may be partly taxable depending on total income. Traditional TSP withdrawals are taxed as regular income, while Roth TSP withdrawals can be tax-free if certain conditions are met.
Video Transcript
Read the full transcript142 words
A lot of federal employees are surprised by how much of their retirement income is taxable. It's one of those things that's easy to underestimate, and it can throw off your budget if you're not accounting for it.
Most of your federal retirement income is taxable. Your FERS pension is taxed as regular income. Social Security may be partly taxed depending on your total income. Traditional TSP withdrawals are also taxed as regular income, while Roth TSP withdrawals can come out tax-free if certain conditions are met.
How much you actually owe depends on your total income, where you live, and how your withdrawals are structured. A CPA or financial advisor who understands federal benefits can help you set things up in a way that minimizes your tax bill over time. That's worth thinking about before you start drawing income, not after.
Ready to review your plan?
These videos cover the general rules. Your numbers are specific to you and need guidance tailored to your situation and goals. Schedule a call with an advisor and walk through your plan.
Schedule Your CallThe content in this library is provided for educational and informational purposes only and does not constitute investment, tax or legal advice, or a recommendation to buy, sell or hold any security or to pursue any particular strategy. It does not take into account your individual objectives, financial situation or needs. Investing involves risk, including the possible loss of principal. Rules governing federal benefits, the Thrift Savings Plan, Social Security and taxation are subject to change, and information presented may not reflect the most current guidance. Consult a qualified professional regarding your own circumstances before acting on any information presented here.