Basic Division Officer Course (BDOC) Week 1 Practice Test

In a Traditional TSP, contributions are made with pre-tax dollars and the account grows tax-deferred. That means you don’t pay taxes on the contributions or the investment gains while the money stays in the plan. Taxes come due when you withdraw the funds in retirement, and those withdrawals are taxed as ordinary income. So the investments are taxed after withdrawal, not beforehand or on a yearly basis. (Early withdrawals can carry penalties in addition to ordinary income tax, unless an exception applies.)