Thrift Savings Plan (TSP) Annuity

Federal employees have a lot of questions when it comes to the TSP annuity. This is different from the FERS annuity and it is important to understand how the TSP annuity works before making a decision to take the annuity.

[@Gzluweez]

If you have other investments, a partial annuity can provide the ballast that allows more risk in other investments and higher total return. You don’t have to put all of it into annuity either. If you think you’ll be subject to any mental impairment later or elder abuse, this can protect you from yourself.

[@noway5976]

Good information Brad. I honestly can’t think of when a TSP annuity is a good fit. I suppose the person that would take this annuity has most, if not all of their TSP in the “G” fund. Someone not knowledgeable in this financial area, likely becomes even more conservative from fear of the unknown. Unfortunately, making the person more susceptible to a fast talking salesman with a product that is not completely in the client’s best interest.

[@FederalRetirementPlanning]

Great point on fear of the unknown. Most annuities that are sold are fear driven.

[@dmoon9037]

An older individual with good health and family genetics that point to outliving (mortality) table life expectancy. An individual with lots of equity exposure and wants to use immediate annuity as a (nearly) risk free proxy for fixed income exposure in the overall portfolio. This can happen more often with Guard and Reserve TSP holders, where savings and compensation from the private sector are more likely to result in intangible net worth outside of the TSP. The fast talking salesfolk focus on VAs and FIAs (best commissions), not on immediate and other fixed rate annuities.

[@Retired-jr3qs]

Great video. I retired at 56 years old and no way would I get an annuity

[@AxelQC]

I suppose if you were single, had no heirs, and didn't care what happened to your money when you die, then annuity would guarantee you money for life. Otherwise, it's probably not a good fit for most people.

[@FederalRetirementPlanning]

Those are definitely some characteristics that would make it more appealing

[@scottschulte1157]

Excellent info Brad. Quality clarification on "annuities". Which is which and the fact that an annuity has it's place, but is oversold by commissioned insurance salespeople and therefore a bad option most of the time.

[@FederalRetirementPlanning]

Thanks Scott. I wouldn't argue that an annuity can be a fit is specific situations, but an immediate annuity for a fed that has two guaranteed streams of income is usually not a good fit.
And I would agree that there are a lot of salesman trying to make a buck pushing annuities.

[@dmoon9037]

@@FederalRetirementPlanning the answer, as you well know, is It Depends(tm). How old is the individual and what are her/his health prospects, how much wealth (and how allocated) outside of the TSP, and what are the SS and FERS annuity monthly benefit amounts relative to the individual’s fixed expense requirements in retirement.

[@westonlee9778]

How do I change my tsp funds to Roth & keep the funds in tsp?

[@FederalRetirementPlanning]

You can’t, TSP doesn’t allow in plan conversions

[@user-ih6os8kc1d]

what if your 70 years old, what would you say would be the best way to access your tsp?

[@FederalRetirementPlanning]

Up to u. U can leave it in TSP and take distributions or move it to an IRA which would give u some benefits that TSP doesn’t