Should I Take My TSP as an Annuity?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Reasons Against TSP Annuity Option

  • Irrevocability and Lack of Liquidity: Once you opt for the TSP annuity, the decision is irreversible, and you lose access to the lump sum amount, limiting financial flexibility.
  • Low Interest Earnings: TSP annuities generally offer minimal interest, potentially leading to less favorable financial growth compared to other investment options.
  • Absence of Death Benefit: In many cases, TSP annuities do not provide a death benefit, meaning no residual value for beneficiaries after the annuitant’s death.

Alternative: IRA Fixed Indexed Annuity with GLWB

  • Control Over Money: Rolling over into an IRA fixed indexed annuity allows more personal control over the funds.
  • Liquidity: Unlike the TSP annuity, this option provides some level of liquidity.
  • Interest Earnings: These annuities can earn interest, potentially leading to greater financial growth.
  • Inflation-Adjusted Payments: Payments can increase with inflation, mirroring the increasing payment option in TSP payouts.
  • Death Benefit: Provides a lump sum death benefit, ensuring value for beneficiaries.

Helpful Tool: How much can my TSP pay me in guaranteed retirement income

TSP Annuity vs. IRA Fixed Indexed Annuity with GLWB

FeatureTSP AnnuityIRA Fixed Indexed Annuity with GLWB
LiquidityNoYes
Interest EarningsLow/NonePotentially Higher
Control Over FundsLimitedHigh
Inflation AdjustmentNoYes
Death BenefitOften AbsentYes

Conclusion

Opting for an IRA fixed indexed annuity with a Guaranteed Lifetime Withdrawal Benefit (GLWB) is recommended over the TSP annuity option. This alternative offers greater financial flexibility, the potential for higher interest earnings, inflation-adjusted payments, and a death benefit. This approach ensures more control over your retirement funds while providing comparable benefits to the TSP annuity.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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