TSP Account Pay-out Options
Option 1 – Receive a lump sum payment (A Financial Land Mine)
(NOT A GOOD IDEA BECAUSE OF TAXATION AT POSSIBLY A VERY HIGH TAX BRACKET, LOSS OF PROTECTION FROM LEANS, JUDGEMENTS, GARNISHMENTS, AND LOSS OF TAX DEFERRAL)
Option 2 – Get equal payments over a number of years
You may live too short, or You may live too long
(Be aware that neither the specified dollar amount nor the TSP-computed payment options is guaranteed to last your entire lifetime.)
Option 3 – Buy an annuity through the TSP
With an annuity through the TSP/ MetLife
1. In all cases, no lump sum or additional monthly benefits are payable once the payout option chosen is satisfied
2. You forfeit the principal and therefore have no access to it anymore
3. No death benefit to your heirs
Option 4 -Do nothing and leave the TSP funds with the FERS
1. Be subjected to low rates of return in the G Fund (not keeping up with inflation and therefore eroding purchasing power)
2. Market risk through the F, C, S, I, L funds (all at a very low cost).
Option 5 -Roll it over to an IRA
If You Are 59 1/2 Or Older, Consider An “In-Service Distribution” As Allowed By Your TSP. With the right proper financial tool where:
1. You get a guaranteed rate of return for income purposes greater than the TSP’s G Fund “Safe Alternative”
2. Taxes remain deferred until withdrawal – or Tax-Free if a ROTH
3. There is no cost or taxation for rolling it over to an IRA
4. It has little to no fees at all depending upon the objectives to achieve
5. You get an immediate bonus
6. Growth keeps up with inflation
7. You can’t lose to risk, correction or volatility of the market, EVER
8. You get a Predictable Life Income – After all, monthly bills require monthly income (even during retirement)
9. You do not lose control or ownership of the principal (No Annuitization)
10. Your loved ones inherit it upon your death
11. Your loved ones can “stretch it” so they don’t pay full tax upon your passing
Note: The Federal Government does not administer FEGLI or the TSP. FEGLI is administered by the private sector through MetLife, the TSP is administered by Blackrock/ Merryll Lynch & subsequently by MetLife for the Life Annuity when purchased with funds from the TSP.
