Q. In running various scenarios using the TSP website calculators for TSP payout options (life expectancy and/or specific dollar amount) I notice that all the monthly amounts paid will drop off sharply sometime soon after a person reaches 100-plus years of age. What if a centenarian is still in relatively good health by that time and still needs the income from the TSP? Also what about the effects of inflation after so many years? Does a person need to plan to reinvest some TSP payout into another type of investment in order to provide for very late old age?
A. The effect you are seeing only occurs consistently when modeling monthly distributions based on your life expectancy, and depends upon the expected rate of return you enter. It does not occur with an annuity or fixed payments, although the buying power of those payments may be eroded by inflation over time. The life expectancy payment drop off after age 100 occurs because your life expectancy declines rapidly after that age, so a larger portion of your remaining account balance is distributed each year.
