Q: My wife retired in February. Our current plan is to take $50,000 from her Thrift Savings Plan to pay off some high-interest debt and leave the rest in the TSP to be invested into a monthly annuity. Is this allowed? Does she have options as to what annuity the money is invested in? Is their an option for a lump-sum survivor payment of the unpaid balance at the time of death? How does she proceed with implementing her final decision?
A: She may take one partial withdrawal from her account, if she hasn’t already done so. She may also use her TSP money to purchase an annuity from MetLife through the TSP, or she may move the money into any individual retirement account and purchase an annuity from any insurance company she chooses. The TSP’s annuities are not investment contracts, they are insurance policies, so once she makes the purchase, she has no further control over the principle. There is a TSP annuity option that provides for a lump-sum payment upon the death of the annuitant, under certain circumstances. You can learn everything you need to know about TSP annuities by visiting the TSP website here.