TSP Options at Retirement: Payments, Withdrawals, Annuities and Rollovers

Your TSP choices when you separate

You can combine several, and leaving your money where it is is a legitimate choice. For many federal employees it's a sound one.

Leave it in the TSP

Your money keeps the TSP's low-cost funds and keeps growing tax-deferred. You'll have to start required minimum distributions at 73, or 75 if you were born in 1960 or later.

Take installment payments

The TSP pays you a dollar amount you choose, or an amount based on your life expectancy, monthly, quarterly or yearly. What's left stays invested, so how long it lasts depends on the markets.

Take a single withdrawal

Take some or all of your balance. Traditional TSP money is taxed as income in the year you take it, and 20% is withheld for federal tax on amounts you could have rolled over. Before 59½ a 10% penalty can apply, unless you separated in or after the year you turned 55 (50 for public safety employees).

Buy a TSP annuity

The TSP lets you use part or all of your balance to buy a life annuity from its annuity provider: income for life, for you alone or with your spouse, with options such as a cash refund. Once bought, it can't be undone.

Move it to an IRA or another plan

Transfer all or part of your balance to an IRA or an eligible employer plan, with no tax due when it's done as a direct transfer. That opens up options the TSP doesn't offer, such as fixed and fixed indexed annuities that protect your money from market drops, and gives up the TSP's own funds for the money you move.

Rules worth knowing

Your spouse has a say. Married FERS participants generally need their spouse's written consent for withdrawal choices other than a joint-life annuity.
Roth TSP money has its own rules. Qualified Roth withdrawals are tax-free once you're 59½ and it has been five years since your first Roth contribution.
The penalty-free age is different outside the TSP. The separation-at-55 exception (50 for public safety employees) applies to money taken from the TSP. Move it to an IRA and the penalty-free age becomes 59½.
Your pension and Social Security come first. Under FERS they cover part of your income for life. Knowing how much is left for your TSP to cover tells you how much guaranteed income, if any, you'd want to add.

TSP questions

Can I move my TSP into an annuity?

Yes. You can transfer TSP money to an IRA and use it to buy an annuity held as an IRA. Done as a direct transfer, the move isn't taxed. Traditional TSP money goes to a traditional IRA, and Roth TSP money to a Roth IRA.

Should I leave my money in the TSP?

For many federal employees, yes. Moving some of it makes sense when you want something the TSP doesn't offer, like protection from market drops with some growth potential, or guaranteed income on terms you choose. The review compares both.

Is the TSP annuity the same as one from an insurance company?

The TSP's annuity is bought from an insurance company too, but you can only choose from the options the TSP offers, at the rates it gets that month. Outside the TSP you can compare many insurers and annuity types, including ones that protect your money while it grows before income starts.

Is RetireLevel part of the TSP or the government?

No. RetireLevel is a private marketing company. We are not affiliated with, endorsed by, or connected to the U.S. government, the TSP, the FRTIB, OPM or any agency. For official rules and current figures, go to tsp.gov.

Leaving federal service? See what your TSP could pay you each month.