That is the third of 4 columns discussing TSP withdrawal choices which are out there to Thrift Financial savings Plan (TSP) contributors who both depart federal service or retire from federal service. This column explains TSP life annuities, one other withdrawal possibility for TSP contributors. It must be emphasised {that a} TSP life annuity bought with TSP account funds is just not the essential annuity {that a} retired CSRS or FERS worker receives beginning instantly after the worker retires from federal service.
What’s a TSP life annuity?
A TSP life annuity is just not like proudly owning a TSP account, a conventional IRA or a Roth IRA, certificates of deposit, a brokerage account or a checking account. When a separated TSP participant purchases a TSP life annuity, the participant offers up management of the TSP account cash used to buy the annuity. In alternate, the participant receives lifetime month-to-month funds from the TSP annuity supplier. However as can be defined, there are some disadvantages related to a TSP life annuity.
Quantity of the TSP participant’s life month-to-month annuity funds
The components that have an effect on the quantity of a participant’s month-to-month annuity fee embrace the next:
• The greenback quantity of the participant’s TSP account that’s used to buy the TSP life annuity.
• The participant’s age when the annuity is bought (and the age of the separated participant partner’s age in case a joint spousal annuity is bought).
• The annuity options and choices the participant chooses, and
• The “rate of interest index” when the annuity is bought.
These separated TSP contributors and beneficiary TSP contributors who’re serious about buying a TSP life annuity are inspired to go onto the TSP web page at https://www.tsp.gov/calculators/tsp-annuity-calculator/#panel-1 and use the “TSP annuity calculator” to estimate their month-to-month TSP annuity fee. A TSP participant should enter sure data as a way to get hold of an estimate of their month-to-month fee. The precise quantity of the TSP participant’s month-to-month funds can’t be decided till the day of the TSP annuity buy.
Buying a TSP Annuity
The method for buying a TSP annuity is similar course of as requesting TSP installment funds or requesting a single (partial) withdrawal. Specifically, the TSP participant should log into the “My Account” part at https://www.tsp.gov and click on “Withdrawals and Modifications to Installment Funds.” The net instrument is then used for requesting any sort of TSP withdrawals.
The minimal quantity with which to buy a TSP annuity is $3,500. This minimal applies individually to every steadiness – the normal TSP and Roth TSP accounts used to buy the annuity. The $3,500 minimal TSP account steadiness comes into play if a participant has each conventional TSP and Roth TSP balances and the participant chooses to not have the cash for the annuity buy come solely from one TSP account or the opposite. When that occurs, the TSP will take the cash from the participant’s two TSP account balances “pro-rata,” that means within the proportion they make up the full account steadiness.
If a separated TSP participant chooses to have TSP funds for an annuity buy taken from each the normal TSP account steadiness and from the Roth TSP account steadiness, then the next guidelines apply:
• If utilizing one’s whole account steadiness to buy the annuity and one of many balances is at the very least $3,500 however the different TSP account steadiness is just not, then the TSP will buy the annuity with the account steadiness of the TSP account that’s at the very least $3,500 and pay the opposite steadiness on to the TSP participant as a money fee.
• If the TSP participant is utilizing a portion of his or her account to buy a TSP annuity and both of the TSP accounts has lower than $3,500, then the TSP will reject the TSP participant’s TSP annuity request.
• If the results of the “pro-rata” calculation ends in both the Roth TSP or the normal TSP portion being lower than $3,500, the TSP will proceed as if the participant doesn’t have the minimal TSP account steadiness to proceed. The next instance illustrates:
TSP participant Olivia’s account steadiness is $190,000 In her conventional TSP account and $10,000 in her Roth TSP account. Olivia requests a TSP annuity of $25,000. The TSP will calculate $190,000/$200,000, or 95 p.c, of $25,000 ($23,750) coming from his conventional TSP account and $10,000/$200,000, or 5 p.c, of $25,000 ($1,250) coming from the Roth TSP. For the reason that $1,250 coming from the Roth TSP account is lower than $3,500, the TSP will reject Olivia’s TSP annuity request of $25,000.
TSP life annuity choices
By means of the TSP’s annuity supplier, the TSP presents the next sorts of annuity choices:
• Single life annuity with degree or rising funds.
• Joint life annuity with the separated TSP participant’s partner with degree or rising funds.
• Joint life annuity with somebody apart from the separated TSP participant’s partner with degree funds.
These several types of TSP annuities are listed under, adopted by an outline and dialogue of a number of further annuity options {that a} separated TSP participant can select. Observe that the extra incorporates a TSP participant selects for his TSP life annuity, the much less month-to-month funds the TSP annuity will present. Just one sort of annuity may be bought per every withdrawal request.
Single life and joint life TSP annuities
An annuity that gives month-to-month funds solely to the separated TSP participant so long as she or he lives known as a single life annuity. Sure single life annuity choices: specifically, (1) Money refund and (2) Ten-year sure, present for a beneficiary who might obtain funds after the loss of life of the TSP participant. However as can be proven under, the extra options added to the only life annuity (comparable to rising funds, money refund and ten-year sure) the much less month-to-month fee to the participant.
An annuity that gives month-to-month funds to the separated TSP participant and the particular person with whom the participant chooses to share the participant’s annuity (the participant’s joint annuitant) are alive, known as a joint life annuity.
If the TSP participant chooses the money refund possibility, a named beneficiary will obtain the steadiness within the annuity after the participant and joint annuitant have each died. Normally, the joint annuitant is the participant’s partner. When both the participant or the joint annuitant dies first, month-to-month funds can be made to the survivor for his or her lifetime. The quantity of the fee whereas the participant and the joint annuitant are alive and the quantity of fee to the survivor is dependent upon whether or not the participant chooses a one hundred pc or a 50 p.c survivor annuity. A participant who chooses a joint life annuity has to supply proof of the joint annuitant’s age.
If the TSP participant chooses an annuity that gives for a joint annuitant apart from the participant’s partner, the joint annuitant have to be both a former partner or somebody with an insurable curiosity within the participant. Which means the person is financially depending on the participant and will moderately anticipate to derive monetary profit from the participant’s continued life. Blood kin or adopted kin (however not kin by marriage) who’re nearer than first cousins are presumed to have an insurable curiosity within the participant.
Two sorts of joint annuities can be found:
• one hundred pc survivor annuity. The quantity of the month-to-month annuity fee to the survivor (both the TSP participant or the joint annuitant) is similar because the annuity fee whereas each TSP participant and joint annuitant are alive. Nonetheless, the quantity of the month-to-month funds that the TSP participant receives whereas the joint annuitant is alive is mostly lower than it could be in comparison with selecting a 50 p.c survivor profit.
• 50 p.c survivor annuity. The quantity of the month-to-month annuity to the surviving annuitant (both the surviving annuitant is the TSP participant or the joint annuitant) is decreased to 50 p.c of the annuity fee whereas the TSP participant and joint annuitant are each alive.
If a joint annuitant apart from a partner is called and the joint annuitant is greater than 10 years youthful than the TSP participant, then the TSP annuitant should select a joint life annuity with the 50 p.c survivor profit. The one exception is for a former partner to whom all or a portion of the TSP participant’s account is payable beneath a retirement advantages court docket order.
Degree and Rising Fee Annuities
As soon as a TSP annuitant chooses a single life or a joint life annuity, the TSP participant can determine whether or not she or he needs to obtain degree funds or rising funds. Selecting degree funds ends in the quantity of month-to-month annuity funds remaining the identical from 12 months to 12 months. With a single life annuity, the TSP participant receives the identical month-to-month fee for so long as she or he lives. With a joint life annuity, a TSP participant receives the identical month-to-month fee for so long as the TSP participant and joint annuitant are alive. The month-to-month fee to the survivor annuitant (the TSP participant or the joint annuitant relying on who dies first) will rely on whether or not the TSP participant chooses a one hundred pc survivor annuity or a 50 p.c survivor annuity, however it can stay on the identical month-to-month annuity quantity for the lifetime of the survivor annuitant.
Rising funds is the quantity of the month-to-month annuity that can enhance by 2 p.c on the anniversary date of the primary fee. When TSP funds begin, they’re smaller than they’d have been if the TSP participant chosen degree funds. Nonetheless, the funds will enhance yearly. Rising funds may be mixed with both the only life annuity or the joint life annuity with partner. Rising funds can’t be chosen when the joint annuitant is just not the TSP participant’s partner.
Extra Annuity Options That Permit for Beneficiaries
Two further annuity options will present funds to named beneficiaries. These options are the “money refund” function and the “ten-year sure” function that are mentioned right here. Observe that when both of those annuity options is chosen by the TSP participant, the month-to-month annuity funds can be lower than they’d have been had the TSP participant chosen a TSP annuity with out both of those options.
• Money refund. If the TSP participant and if relevant, the joint annuitant each die earlier than the quantity used to buy the TSP annuity has been paid out, any remaining quantity within the annuity can be paid to the TSP participant’s designated beneficiary in a lump sum fee. For instance, if the TSP participant bought a joint annuity for $300,000 and each the TSP participant and the joint annuitant die after receiving a complete of $200,000 in annuity funds, the designated beneficiary will obtain a lump sum fee of $100,000. This function may be mixed with both a single life or a joint life annuity and with degree or rising funds.
• Ten-year sure. If the TSP participant dies earlier than receiving funds for a 10-year interval, the funds will proceed to a delegated beneficiary for the remainder of the 10-year interval. If the TSP participant lives past the 10-year interval, the TSP annuitant will proceed to obtain a month-to-month annuity fee, however no funds can be made to a beneficiary when the TSP participant dies. This function may be mixed with a single life annuity or with both degree or rising funds. The ten-year sure function can’t be mixed with a joint life annuity.
The desk under summarizes the TSP life annuity choices and options:
* A married FERS or uniformed companies participant should get hold of his or her partner’s waiver of the partner’s TSP survivor annuity profit if an possibility is chosen apart from joint life with partner, with degree funds and 50% survivor annuity. ** Obtainable if joint annuitant is just not greater than 10 years youthful than the participant.
The next is a abstract of choices related to TSP annuities:
1. When a TSP participant is selecting the choices and options chosen with their annuity, the extra options chosen, the much less month-to-month annuity revenue fee.
2. The TSP annuity sort that ends in the biggest month-to-month annuity fee is a single life annuity with no money refund function or no 10-year sure function. Nonetheless, with a single life annuity, upon the loss of life of the /TSP annuitant any remaining funds of the quantity that the TSP annuitant used to buy the annuity are forfeited. No beneficiary may be named to obtain regardless of the TSP participant didn’t obtain.
3. The “10-year sure” refers to a function of a TSP life annuity by which month-to-month funds are assured for at least 10 years no matter whether or not the TSP annuitant lives that lengthy.
4. If chosen, a TSP annuity with rising funds will present a collection of month-to-month funds that enhance yearly at a set charge. That charge is present 2 p.c. The aim of the annual enhance within the month-to-month funds is to assist month-to-month revenue maintain tempo with inflation. The drawback of a TSP annuitant’s alternative of accelerating funds is that for the primary 12 months the month-to-month funds are considerably decrease in comparison with selecting a TSP annuity with degree funds.
5. A joint life annuity supplies revenue to the TSP annuitant and to a selected beneficiary, both a partner or one other beneficiary (normally a relative).In consequence, the TSP annuitant will obtain much less month-to-month revenue in contrast not selecting a joint annuity. The larger the distinction in ages between the TSP annuitant and the designated joint annuitant, the much less month-to-month annuity revenue for the TSP annuitant. A 100% survivor annuity will end in much less month-to-month revenue for the survivor annuitant in comparison with a 50% survivor annuity.
To assist higher perceive the varied options and choices out there with TSP life annuities, an instance is offered. An worker, Frank, age 62, retired from federal service on Could 31,2025, and in August 2025 elected to make use of $400,000 from his conventional TSP account to buy a TSP life annuity. Going to the TSP Site, Frank accesses the TSP annuity calculator https://www.tsp.gov/calculators/tsp-annuity-calculator/#panel-1 as a way to get an estimate of his month-to-month TSP annuity revenue for 2 sorts of annuities, specifically: (1) Single life (degree fee with no money refund), (degree fee with money refund), (degree fee with 10-year sure), (rising fee of two.0 p.c and no money refund), (rising fee of two.0 p.c with money refund) and (rising fee of two.0 p.c and 10-year sure); and (2) Joint life annuity along with his spouse Helen, age 60; (degree fee, 100% survivor profit, no money refund). (degree fee 50% survivor profit, no money refund); (degree fee, 100% survivor profit with money refund), (degree fee 50% survivor profit with money refund), (rising fee of two.0 p.c with 100% survivor profit and no money refund), (rising fee of two.0 p.c with 50% survivor profit with no money refund), (rising fee of two.0 p.c with 100% survivor profit with money refund), and (rising fee of two.0 p.c with 50% survivor profit with money refund). The month-to-month fee quantities for Frank aged 62 by means of age 82 following the annuity buy date are offered in Chart I and Chart II:
Chart I (Single Life Annuity of $400,000 for Frank, age 62)*
Chart II (Joint Life Annuity of $400,000 for Frank, aged 62 and Frank’s spouse Helen, age 60)*
Necessary reminders about TSP annuities
1. TSP annuity purchases are irrevocable; modifications can’t be made as soon as a TSP annuity is bought.
2. Utilizing both the ThriftLine Service Heart choices on https://www.tsp.gov the instruments out there in My Account will assist a TSP participant calculate and mannequin potential TSP annuities.
3. TSP contributors are suggested to match the several types of TSP annuities and profit quantities to find out which TSP annuity most closely fits a TSP participant’s monetary targets and wishes.
4. Rates of interest change month-to-month, and timing could also be a think about figuring out a TSP participant’s profit quantity.
