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[quote=Anonymous][quote=Anonymous]Withdrawals from any retirement account (such as TSP or 401k) are taxed at ordinary income rates, not cap gains.

"Most" people consider 4% withdrawal to be a perfectly fine/conservative withdrawal rate.  Bogleheads tend to be savers, and there are a lot of them who tend to be conservative in their assumptions, so you can certainly find discussions there about lower "safe withdrawal rates" but I think they are overstated.

I don't think the SS supplement plays a big role in retirement planning for most people--i think it runs about half of your SS benefit and only lasts from retirement to age 62.[/quote]

This impacts how much you think you will need in retirement to maintain your lifestyle.  When you are paying into your TSP the contributions are not taxed and your taxable income is therefore lower.  So, if you earn $100,000 and save 10% in your TSP, your taxable income is just $90,000.

If you retire at age 66 and your pension, social security benefit and TSP annuity all add upto 90% of your working income, the entire amount (in my simple example, $90K) is subject to income tax and none to capital gains tax.

In other words, because you don't need to save for retirement anymore, you may need less income to maintain your lifestyle in retirement.  
I assume payroll taxes are taken out of the $100K annual income while you work but not out of the $90K annual income when you are in retirement.  So my hypothetical worker only needs to replace 83% (approx.) of pre retirement income now that he does not need to contribute 10% to a TSP and does not need to pay (7%) payroll taxes.

Anyone know how health insurance works?  Right now, we pay just under $5000 in premiums every year (approx.) but this is not taxed.  Does our contribution stay the same in retirement (is the govt. match the same for retired workers?).  Is the premium tax-deductible in retirement too?[/quote]

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