Roth TSP annuity

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Q. If I buy an annuity with my TSP funds when I retire, will there be two separate annuities? One for my traditional TSP account, and one for my Roth TSP account? Or, will the Roth balance be merged into to one annuity tax free?

A. From page 6 of the instructions for Form TSP-70, which is available at https://www.tsp.gov/PDF/formspubs/tsp-70.pdf#:

Special Rules for Annuities: The minimum threshold for an annuity purchase is $3,500. If you have both a traditional (non-Roth) and a Roth balance in your TSP account and you elect to purchase an annuity, the minimum threshold of $3,500 applies to each balance separately. You may choose to purchase an annuity as long as you have $3,500 in either your traditional or Roth balance. The TSP will purchase two of the same type of annuity (one with the traditional balance and one with the Roth balance). You cannot choose different
annuities for each type of balance.

Also, the following rules apply:

  • If you choose to use 100 percent of your TSP account to purchase an annuity and both balances are below $3,500, your form will be rejected. If you have both a traditional balance and a Roth balance and at least one of the balances is at least $3,500, the TSP 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.
  • Alternatively, if you choose an annuity as part of a mixed withdrawal, any amount(s) that cannot be used to purchase the requested annuity will be split proportionally and distributed according to the other withdrawal option(s) you have chosen.
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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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