I will be retiring in a couple years from civil service and I'm trying to figure out the best way to use my TSP (which is the federal government's version of a 401K). My initial plan when I retire was to use my TSP to pay off our mortgage. However, I saw my financial advisor a couple weeks ago and he advised against that. He said it's better to keep my mortgage and just take monthly distributions from my TSP and use that to pay off the mortgage. He said the tax liability for taking out a large lump sum to pay off a mortgage would be very high, he said probably something like 33%. So let's say I set up a monthly distribution for the amount of my mortgage payment (+ escrow), how would the tax rate on that amount be determined? Are distributions from pensions taxed at a specific rates, or does it just become part of your annual income and the tax rate is simply based on how much I make a year? Can I have taxes withheld from my distributions when they're sent out? Another thing I don't understand about the TSP is at age 70 1/2, I have to start pulling money out. Does that still apply if I'm already taking a monthly distribution?