Updated: August 29, 2026
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The Thrift Savings Plan gives a separated participant four documented ways to draw down the account: a partial or total lump-sum distribution, installment payments, a life annuity, or any combination of the three. The life annuity sits behind a single outside insurance vendor and a specific menu of options.
This page documents the mechanics of that annuity purchase as of 2026. It covers the vendor, the minimum, the option menu, the interest-rate index that sets the payout, the tax treatment, the RMD interaction, the irreversibility rule, and the spouse-consent requirement. It does not recommend the annuity or advise against it. Those choices belong to the participant.
The annuity provider and how the purchase works
The Federal Retirement Thrift Investment Board contracts a single outside insurance vendor to underwrite every TSP life annuity. The TSP fact sheet Annuities (TSPFS24, October 2024) refers to that vendor as the “TSP annuity provider” and does not name it in the public document. The current contract vendor is Metropolitan Life Insurance Company, commonly known as MetLife.
The purchase process runs through the participant’s My Account portal at tsp.gov or through the ThriftLine Service Center. After the TSP receives all required paperwork, it generally disburses the funds to the annuity provider within five business days. The provider then purchases the annuity within about two more business days, using the interest-rate index in effect for the month of purchase.
There is no commission or sales load on the transaction. Once the money has left the TSP account, the participant’s contract is with the annuity provider directly, not with the TSP. Monthly annuity payments begin approximately one month after the annuity is purchased.
The 3,500 dollar minimum and how it applies to Roth
The minimum amount required to purchase a life annuity from the TSP is 3,500 dollars. This minimum applies separately to a traditional balance and to a Roth balance. A participant with only 2,000 dollars in the Roth balance and 60,000 dollars in the traditional balance cannot use the Roth portion for an annuity.
The pro rata rule adds a second minimum test. When a participant uses part of the full account to buy an annuity, the withdrawal is drawn pro rata from both balances in the proportion they represent of the total account. If the pro rata result puts either the Roth or the traditional slice below 3,500 dollars, the annuity option is not displayed and cannot be selected.
A worked example from the fact sheet: a participant with 80,000 dollars traditional and 20,000 dollars Roth requests a 10,000 dollar annuity purchase. The pro rata split is 8,000 dollars traditional and 2,000 dollars Roth. Because the 2,000 dollar Roth slice falls below the 3,500 dollar floor, the TSP rejects the request.
The annuity options: single life, joint life with spouse, joint life with other
The fact sheet groups the annuity menu into three top-level structures. A participant chooses one and one only per distribution request.
Single life annuity. Monthly payments to the participant for as long as the participant lives. No survivor. Two optional beneficiary features (cash refund and ten-year certain) can be added if the participant wants a residual payment path for a named beneficiary.
Joint life annuity with the spouse. Monthly payments while both the participant and the spouse are alive, then continuing to the survivor for the survivor’s lifetime. The survivor amount is either 100 percent or 50 percent of the joint-life payment.
Joint life annuity with someone other than the spouse. Same structure, but the joint annuitant is a former spouse or someone with an insurable interest in the participant. Level payments only, no increasing payments. The 100 percent survivor option is available only if the joint annuitant is no more than ten years younger.
The visual below shows how the three top-level structures branch into the full option menu, with the two feature add-ons at the bottom.
Level payments versus increasing payments
Once the participant picks single life or joint life with spouse, the next choice is payment shape. Level payments keep the monthly amount constant for the life of the annuity. Increasing payments start smaller and rise by 2 percent on the anniversary date of the first payment each year.
Increasing payments are available with a single life annuity or a joint life annuity with the spouse. They are not available when the joint annuitant is someone other than the spouse. The 2 percent annual step is a fixed contractual escalator, not an index tied to CPI or any other inflation measure.
The two beneficiary features: cash refund and ten-year certain
Both features carry a monthly-payment cost: choosing either reduces the payment relative to the same option without it. Both direct residual amounts to a named beneficiary under the conditions specified in the contract.
Cash refund. If the participant, and the joint annuitant if applicable, die before the total amount used to purchase the annuity has been paid out in monthly checks, the difference is paid to the named beneficiary in a lump sum. A 50,000 dollar purchase that has paid out only 40,000 dollars at death produces a 10,000 dollar refund. Cash refund is available with single life or joint life, level or increasing.
Ten-year certain. If the participant dies before receiving payments for a full ten years, the remaining payments in that ten-year window continue to the named beneficiary. Living past the ten-year mark leaves no residual for a beneficiary. Ten-year certain is available only with a single life annuity, level or increasing. It cannot be combined with a joint life annuity.
The interest-rate index and how it sets the payout
Four inputs determine the monthly amount: the purchase amount, the participant’s age (and joint annuitant’s age if applicable), the option selected, and the interest-rate index in effect on the purchase date. The interest-rate index changes monthly, and the rate in force on the date the annuity provider actually receives the funds is the rate used.
Timing matters because of the two-step disbursement window. A request submitted late in the month may not reach the annuity provider until the following month, in which case the following month’s index applies. The fact sheet flags this timing risk explicitly and says the exact payment cannot be determined until the date of purchase.
Why life-only pays the most: a single-life level annuity with no beneficiary feature carries no obligation past the participant’s death and no annual escalator. Each layer added (joint life, higher survivor percentage, increasing payments, cash refund, ten-year certain) trims the monthly payment relative to that baseline in exchange for a different distribution of risk.
Illustrative purchase quote at age 65
The TSP publishes an annuity calculator at tsp.gov that estimates the monthly payment for any combination of purchase amount, age, option, and current interest-rate index. A participant modeling a 100,000 dollar single-life level-payment purchase at age 65 in a hypothetical 4.5 percent index month would enter those four values in the calculator and read the resulting monthly figure directly.
The exact dollar output depends on the mortality tables the annuity provider uses that month and the precise index reading, both of which change. This page does not publish a specific dollar figure because the calculator output is the only authoritative source and it varies month to month. A participant considering a purchase should generate a fresh quote in the same week the request will be submitted.
How the annuity is taxed
The purchase transaction itself is not a taxable event. The tax treatment of the resulting monthly payments follows the source balance.
Payments from a traditional-funded portion are taxed as ordinary income in the year received, at the participant’s marginal rate. The annuity provider issues a 1099-R each January reporting the taxable amount and any federal withholding.
Payments from a Roth-funded portion return the participant’s Roth contributions tax-free. The Roth earnings portion of any given payment is tax-free only if that payment meets the IRS qualified-distribution rules under IRC section 402A. Annuity payments are not subject to the IRS 10 percent early-withdrawal penalty, regardless of the participant’s age at purchase.
Tax-exempt contributions from combat-zone pay in a uniformed-services account are calculated separately by the annuity vendor and spread across payments based on the participant’s life expectancy. Once the tax-exempt slice is calculated at purchase, that dollar amount remains fixed for the life of the annuity.
How the annuity satisfies the RMD
Once the participant reaches the applicable RMD age (currently 73 under SECURE 2.0 Act section 107 for those turning 72 after December 31, 2022), the TSP begins tracking required minimum distributions on the traditional balance. An annuity purchase satisfies part of the RMD on a percentage basis.
The TSP booklet Tax Rules about TSP Payments (tspbk26) explains the rule on page 14: the percentage of the traditional balance used to purchase the annuity is the same percentage of the current-year RMD that the purchase satisfies. Buying an annuity with 50 percent of the traditional balance satisfies 50 percent of the RMD for that year.
In the first RMD year specifically, the TSP mails a separate check for the full RMD amount before processing the annuity purchase. Annuitized dollars are then no longer part of the TSP account and no longer part of the RMD divisor in later years, because the annuity provider handles those payments outside the TSP.
Irreversibility: no path back to the TSP
Once the funds have been disbursed to the annuity provider, the participant cannot cancel the annuity, change the annuity option, or change the joint annuitant. The TSP booklet Distributions states the rule plainly: the money is no longer managed by the participant, and the purchase cannot be undone.
The one change the participant can still make with the annuity provider is the named beneficiary, when a beneficiary feature is in play (cash refund or ten-year certain). Any other change requires a new annuity contract with a new insurance vendor entirely, funded from money that is no longer in the TSP.
Spouse consent under 5 U.S.C. 8435
A married FERS or uniformed-services participant with a total TSP account balance above 3,500 dollars is subject to the statutory spouse-annuity default under 5 U.S.C. 8435. The default is a joint life annuity with the spouse, level payments, 50 percent survivor benefit, and no cash refund feature.
Any other annuity election, including a single life annuity, a joint life annuity with someone other than the spouse, a different survivor percentage, increasing payments, or the cash refund or ten-year certain features, requires the spouse’s signed waiver. The waiver form is filed through the TSP as part of the distribution request. The separate page on TSP spousal-consent rules walks through the waiver mechanics and the retirement-benefits court-order path.
How the TSP annuity differs from a SPIA in the open market
A single premium immediate annuity purchased in the open market with money rolled over from the TSP into an IRA is a separate product. It uses the same underlying actuarial structure as the TSP annuity, but the pricing, the vendor, the option menu, and the consumer-protection framework are different.
A SPIA in the open market is not backed by the TSP contract and is not underwritten by the TSP annuity provider. It is a state-regulated insurance contract, and unpaid claims fall under the state guaranty association coverage limits of the state where the annuitant resides. The separate page on SPIA mechanics covers the pricing model, the state guaranty association layer, and the ways a SPIA option menu differs from the TSP menu.
This page does not compare TSP annuity pricing to open-market SPIA pricing, because the comparison depends on quotes obtained the same day from both channels. Prices move with the interest-rate index and the insurer’s current pricing tables.
One factual note on gold IRA destinations
A Traditional IRA that holds IRS-approved precious metals under IRC section 408(m)(3) is one of the documented destinations available to a separated TSP participant who chooses a direct rollover instead of an annuity purchase. The rollover moves the pretax balance out of the TSP without triggering current-year tax, and no cash reaches the participant.
Once the annuity purchase is finalized, the annuitized dollars are no longer eligible for any rollover. Only balance that remains in the TSP can be rolled out to an IRA of any type. The 408(m)(3) metals-IRA route is factually one option among several; this page does not evaluate it against any other rollover destination.
Updated August 29, 2026.
Sources cited
- TSP booklet: Distributions (tspbk25)
- TSP booklet: Tax Rules about TSP Payments (tspbk26)
- TSP fact sheet: Annuities (TSPFS24, October 2024)
- TSP: Withdrawals in retirement (post-separation distribution options)
- Cornell Legal Information Institute: 5 U.S. Code section 8435 (protections for spouses)
- Cornell Legal Information Institute: 26 U.S. Code section 408 (individual retirement accounts, including 408(m)(3) IRS-approved metals)
- SECURE 2.0 Act (Consolidated Appropriations Act, 2023, Public Law 117-328, Division T, section 107 RMD age increase)