Ask The Experts: Money Matters

By Mike Miles

TSP annuity options for Postal Service early-out

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Q. I will be taking the early-out offered by the Postal Service. I am a 54-year-old CSRS employee of 35 years. I have a Thrift Savings Plan account. Please give your opinion on the best option such as taking the MetLife annuity, joint with spouse, level or increasing, cash refund compared with simply leaving the money in TSP and getting monthly payments either by specific amounts or increasing by life expectancy. I don’t quite understand the difference in the two options.

A. There is no “best” choice. Using your money buy an immediate annuity guarantees income for life. You give up control of the principal and risk losing buying power to inflation in exchange for the guarantee, however. Alternately, you may retain control of the principal, manage it for your benefit and withdraw money as you need it. One of the withdrawal options available is a series of monthly payments — either as a fixed dollar amount, or a varying dollar amount that is adjusted each year, automatically, based on your life expectancy. With this method, the previous year’s ending account balance is divided by your remaining life expectancy to determine the new year’s payment amount. If you want to know more, you should read the material available at www.tsp.gov.

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