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 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.

TSP Annuity vs. Monthly Payments – Let’s Have a Look

If you have a steady income stream from other sources (such as your FERS Annuity or from Social Security, you may elect 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 need income from your TSP to sustain your lifestyle in retirement, then you will need to determine the amount of monthly income you need and then consider a withdrawal from your TSP to meet that need.  Non-government solutions such as a fixed annuity may be able to ensure you will receive payments for the rest of your life and should also be considered as an alternative to the TSP Annuity. If you need help with this, use the TSP Retirement Income Calculator in the planning tools section on the TSP website, or you can contact us at the number above for more advice on your TSP withdrawal options.