How to Calculate Your Monthly Annuity
So, what do you plan on doing with your TSP savings after you are out of the federal government? There are several options for you; one, you can take a partial withdrawal then leave the remaining funds in your account until a later date. Two, you can take a full withdrawal to get a lump sum payment all at once, or over a period of time. Three, you can purchase an annuity that will make payment to you for the rest of your life. The TSP will carry out the purchase on your behalf.
An annuity is a benefit paid to you, on a monthly basis for the rest of your life. One is eligible to purchase a life annuity after retirement either from the uniformed service or from federal employment. The amount used to purchase life annuity should be $3,500 or higher; if you have two separate accounts (traditional and Roth TSP accounts), the $3,500 applies separately to each account.
Types of Life Annuities
You can use your entire savings or just a portion of it to buy a life annuity. When you purchase a life annuity, you are guaranteed to get monthly checks for the rest of your life as well as benefits to a survivor; after you die.
The Thrift Saving Plan offers different types of annuity options. They include:
-Single life annuity. This annuity only provides to you for the rest of your life.
-Joint life annuity. This annuity provides to you and the person that you have chosen to share your annuity during both your lifetimes. When either of you dies, the monthly payments will be made to the survivor for the rest of their life.
There are two types of survivor annuities:
1.100% survivor annuity the survivor gets the same annuity amount like they used to receive when both of you were still alive.
2.50% survivor annuity the amount that the survivor gets is half of the payment they used to receive when both of you were still alive.
Annuity Payment Options
Whether you choose a single life of joint annuity, you should also decide if you want to receive level payments or increasing payments.
-Level Payments
The annuity payment amount remains from month to month. The payment made to the survivor on a monthly basis depends on which survivor annuity you choose, and it will also remain the same for as long as the survivor lives.
-Increasing Payments
The annuity payment amount changes annually on the exact date that you made the first payment. The change depends on inflation. The payments cannot increase by more than 3%, and also, they cannot decrease
How Your Annuity Is Taxed
If you make contributions to a traditional TSP, the tax is deferred until the payments are made to you. The monthly payments will be taxed just like any other ordinary income
If you have a Roth TSP, the contributions are made after tax deductions. Therefore, your monthly payments will not be taxed.
How Your Annuity is Calculated
The monthly annuity calculator is based on the following factors:
1. The amount you use to purchase the annuity
2. Your current age and life expectancy
3. The type of annuity and payment option that you select
4. The interest rate index
The TSP monthly annuity calculator is available on the TSP website. Depending on the date you enter, the calculator will tell you the monthly payment amount.
