One of your many options, when you want to make a TSP withdrawal, is to use all parts of the funds in your account to buy a TSP Life Annuity. This option guarantees you a monthly TSP annuity payment as long as you are alive. If you choose a life annuity product that pays survivors or joint annuitants, then the annuity payments will continue as long as either of you is still alive.
There are two points to be noted here. One is that buying a TSP annuity is different from the choice of receiving monthly payments directly from your account. Secondly, the TSP Life Annuity payments you get may be distinct from (and in addition to) the retirement payments you get as a federal annuitant from FERS or CSRS, or as a member of the uniformed services.
So, how exactly does one go about buying a life annuity through the TSP and should they?
Buying a TSP Life Annuity Through – Are There Alternatives?
If you have $3,500 or more as your vested TSP account balance, then you are eligible to request a lifetime TSP annuity. This applies separately to the traditional (non-Roth) and Roth TSP balances in your account. You may opt for a Single life annuity by yourself, or a Joint life annuity with your spouse, or with someone else. Payments from the former cease upon your death.
For joint life annuities, you have the option of choosing a 100% survivor annuity or a 50% survivor annuity. With the 100% option, you or the joint annuitant (whoever is the survivor) will continue to receive the same annuity payment that you received while both of you are still alive. With the 50% option, the annuity paid to the survivor is 50% of that which was paid while both of you are alive.
You can choose to receive fixed (level) payments or increasing amounts that can rise with inflation to adjust for the cost of living.
Alternatives to the TSP Lifetime Annuity are plentiful. We highly recommend that anyone considering the TSP lifetime annuity also to use the TSP Calculator first and then compare the results to non-government options. Our experience has shown us that the TSP lifetime annuity may not be the best product available and it is possible for you to find opportunities that generate greater retirement income while also providing you with more access to your money once retired. Contact us today for a free consultation and TSP advice.
Do not select the TSP lifetime annuity before talking with a knowledgeable TSP expert first.
How to Buy a TSP Life Annuity Through a TSP Withdrawal
If you have decided that you want to buy a TSP Life Annuity, you can fill out Form TSP 70. The rest of the process is typically handled without any additional action required on your part, and this may take several weeks. Should you select this option, your money will be transferred to MetLife Insurance Company, which is the company the TSP has contracted with to provide the TSP Annuity to you.