Purchase an annuity
The process for purchasing an annuity using money from your TSP account is the same as for starting TSP installment payments or making a single withdrawal. Log in to My Account and click “Withdrawals and Changes to Installment Payments.” Then use the online tool for withdrawals. See the TSP booklet Withdrawing From Your TSP Account for Separated and Beneficiary Participants.
The minimum amount with which to purchase an annuity is $3,500. This minimum applies separately to each balance, traditional and Roth. That comes into play if you have both traditional and Roth balances and you choose not to have the money for your annuity purchase come solely from one balance or the other. When that happens, we take the money from your two balances “pro rata,” meaning in the proportion they make up of your total account balance. This pro rata distribution, combined with the $3,500 minimum, can create some situations you need to be aware of.
If you choose to have money for an annuity purchase taken from both your traditional balance and your Roth balance (the default option) the following rules apply:
If you’re using your total account balance to purchase an annuity and one of the balances is at least $3,500 but the other is not, we will purchase an annuity with the balance that is at least $3,500 and pay the other balance directly to you as a cash payment.
If you’re using a portion of your account to purchase an annuity and either of your balances holds less than $3,500, we will reject your request.
If the result of the pro rata calculation results in either the Roth portion or the traditional portion of the purchase being less than $3,500, we will proceed as if you do not have the minimum amount.
Example: You have $80,000 in your traditional balance and $20,000 in your Roth balance and you request an annuity purchase of $10,000. We would calculate that the withdrawal used to purchase the annuity must be $8,000 in traditional money and $2,000 in Roth money. Since that’s less than $3,500, we would reject your request.
After we receive all of the information and documentation necessary to purchase your annuity, we will generally process your annuity request and disburse the funds to the annuity provider within 10 business days. Once your request has been processed and the balance is removed from your TSP account, you cannot cancel your annuity, change your annuity option, or change your joint annuitant.
To learn more about the life annuity withdrawal option, read the TSP fact sheet Annuities.