Q. I have two questions on the Thrift Savings Plan MetLife annuity. On page 11, paragraph 1, under the heading, “How Your Annuity is Taxed,” in the TSP pamphlet, “Withdrawing your TSP Account After Leaving Federal Service” (June 2007), reads:
“… your TSP annuity payments will be taxed as ordinary income in the years when you receive them. However, these annuity payments are not subject to the IRS early withdrawal penalty, even if you are under age 55 when they begin.”
As both my wife and I are under 55 and are considering an early out/buyout that has just been offered, we want to understand all our options for our TSP accounts.
If there is no tax penalty, one option might include using some of the TSP to purchase a MetLife annuity to supplement our pension income stream. Can you confirm this is the case (the TSP representative on the hotline first said it would be subject to the Internal Revenue Service penalty, then when given the language from the pamphlet said “Maybe not, not sure, interesting question” (hardly reassuring). Or do you know what office at the IRS I could call to get an answer?
The other question is: Are the MetLife annuity payments considered income that would reduce either the TSP supplement (at age 56) or Social Security (whenever we choose to draw down)?
A. Payments from a TSP annuity are not subject to the early withdrawal penalty and are not considered earned income.