Purchasing an annuity is one of several options for TSP account holders who leave federal service for retirement or other reasons. Part or all of an account can be turned into monthly payments for life with options including inflation protection and survivor benefits.
Participants also may take out all or part of their accounts as a lump-sum payment or in monthly installments, and may combine the options. The choices come with various restrictions and tax implications comparable to those of similar employer-sponsored retirement savings plans.
Relatively few investors purchase an annuity with their TSP accounts, in part because federal workers already have a defined benefit annuity through their retirement plan, either the Civil Service Retirement System or the Federal Employees Retirement System.