Annuity benefits and limitations
Purchasing an annuity means that you pay now to receive monthly payments that last for the rest of your life. We offer the following annuity options through our annuity provider:
- Single life annuity
- Joint life annuity with your spouse or with someone other than your spouse.
The TSP annuity is not the same as a TSP installment payment. A TSP installment payment is one of the other withdrawal options that you have as a separated or beneficiary participant.
Single life annuity
A single life annuity provides a monthly amount only to you for as long as you live. It stops paying after your death.
Joint life annuity
A joint life annuity provides a monthly amount to you while you and the person with whom you choose to share your annuity (your “joint annuitant”) are alive. When either you or your joint annuitant dies, the annuity will continue to pay monthly benefits to the survivor for the rest of his or her life.
In most cases, participants choose their spouse as the joint annuitant. If you choose someone other than your spouse as your joint annuitant, he or she must be either a former spouse or someone with an insurable interest. This means that the person is financially dependent on you and could reasonably expect to benefit financially from your continued life. Blood relatives or adopted relatives (but not relatives by marriage) who are closer than first cousins are presumed to have an insurable interest in you.
The amount of the monthly payment while you and your joint annuitant are alive and the amount of the payment to the survivor depend on whether you choose a 100% or a 50% survivor annuity.
100% survivor annuity
The amount of the monthly annuity payment to the survivor is the same as the annuity payment made while both you and your joint annuitant are alive.
50% survivor annuity
The amount of the monthly payment to the survivor - whether the survivor is you or your joint annuitant - is cut to 50% of the monthly annuity payment made while both you and your joint annuitant are alive. For example, if your monthly annuity payment is $600 while both you and your joint annuitant are alive, it will be reduced by half, to $300 per month, when either you or your joint annuitant dies.
If you name a joint annuitant other than your spouse who is more than 10 years younger than you, you must choose a joint life annuity with the 50% survivor benefit in most cases.
For more information about joint annuitants, refer to the Life Annuities section of the booklet Withdrawing From Your TSP Account for Separated and Beneficiary Participants.
Annuity payment options
Once you’ve chosen either a single life or a joint life annuity, you must decide whether you want to receive “level” or “increasing” payments.
The amount of the monthly annuity payment remains the same from year to year. Thus, with a single life annuity, you receive the same monthly payment for as long as you live. With a joint life annuity, you receive the same monthly payment for as long as you and your joint annuitant are alive. The monthly payment to the survivor will depend on whether you have chosen a 100 percent survivor annuity or a 50 percent survivor annuity, but it will remain at the same level for the life of the survivor.
The amount of the monthly annuity payment will increase by 2% each year on the anniversary date of the first payment. (Payments from TSP annuities purchased before March 2, 2020, increase annually between 0% and 3% based on the Consumer Price Index.) When annuity payments start, they are smaller than they would have been if you had selected level payments, but they increase each year. Increasing payments can be combined with either the single life annuity or the joint life annuity with spouse. You cannot choose increasing payments when the joint annuitant is not your spouse.
Factors affecting your monthly annuity payment
The factors that affect the amount of your monthly annuity payments include:
- The annuity option you choose.
- Your age when your annuity is purchased.
- The age of your spouse or other joint annuitant if you choose a joint annuity.
- The amount used to purchase your annuity.
- The “interest rate index” when your annuity is purchased.
Use the TSP payment and annuity calculator to try out different combinations to get an annuity estimate. The exact amount of your monthly annuity payment cannot be determined until the date of actual purchase.
Providing for beneficiaries
Two additional features are available to you if you want to provide payments to the beneficiary, or beneficiaries, you name in the annuity section of your TSP withdrawal form. Keep in mind that when you choose additional features, your monthly annuity payments will be less than they would have been had you not chosen any.
If you (and your joint annuitant, if applicable) die before the amount of your TSP balance used to purchase your annuity has been paid out, the remaining amount will be paid to your beneficiary, or beneficiaries, in a lump sum. You can add this feature if you purchase a single life or a joint life annuity, and with level or increasing payments.
If you die before receiving 10 years of annuity payments, your monthly annuity payments will continue to your named beneficiary, or beneficiaries, until the 10-year period is met. If you live beyond the 10-year period, you will continue to receive payments, but no annuity payments will be made to your beneficiaries when you die.
You can add the ten-year certain feature if you purchase a single life annuity with either level or increasing payments. You cannot choose this option if you purchase a joint life annuity.
If you’re married (even if you’re separated from your spouse), spouses’ rights apply to annuity purchases. If you’re a married FERS or uniformed services participant with a total account balance of more than $3,500 and you are making a full withdrawal of your account, your spouse is entitled by law to a joint life annuity with a 50% survivor benefit, level payments, and no cash refund. If you do not use your entire account balance to purchase this particular type of annuity, your spouse must sign the statement on your withdrawal form that waives his or her right to it.
If you’re rehired by the federal government after leaving federal service, you will continue to get any TSP annuity payments that you may already be receiving.