TSP Annuity vs. Monthly Payments – Strategies and Goals
Apart from a single payment as a lump sum amount for immediate spending, other Thrift Savings Plan (TSP) withdrawal options include monthly payments and/or a TSP lifetime annuity. It’s quite common for federal employees to face a situation where there isn’t enough of an account balance for all three options.
Let’s say your withdrawal includes a single payment from a portion of the balance, perhaps for immediate spending needs such as relocation after separation from service. As for the rest of the account balance, you may have to decide between choosing TSP Annuity vs. Monthly Payments or leaving the balance in the TSP after you retire.
This decision should be based on whether you have other sources of retirement benefits and income, such as a company pension, an investment portfolio, IRA accounts, etc.
TSP Annuity vs. Monthly Payments – Lets Have a Look
If you have a steady income stream from other sources (such as your FERS Annuity or from Social Security, you can decide to choose monthly payments if you need to add to the income to maintain your lifestyle.
You can specify a dollar amount or use a TSP calculator to determine the monthly amount for you based on your life expectancy. If necessary, use the TSP Monthly Payment Calculator in the planning tools section on the TSP.gov website to figure out the amount of the monthly payments you should ask for, and the duration of said payments.
If you do not have sufficient income from other sources to live on, then this calculation is a lot more important to you. If you will need income from your TSP to sustain your lifestyle in retirement then you will need to determine the amount of monthly income you should withdrawal from your TSP, or consider non-government solutions such as a fixed annuity or similar that may be able to ensure you will receive payments for the rest of your life. If you need help with this, use the TSP Retirement Income Calculator in the planning tools section on the TSP.gov website or you can contact us at the number above for more advice on your TSP withdrawal options.