TSP Annuity Options Explained: MetLife Annuity vs Lump Sum

Last Updated: January 17, 2026 Reading Time: 8 min

When you retire from federal service, you face one of the biggest financial decisions of your life: what to do with your TSP balance. One option that generates endless debate on Reddit and federal employee forums is the TSP annuity, a lifetime income stream through MetLife.

Should you lock in guaranteed income or keep your money invested? Here's what you need to know.

Key Takeaways

• The TSP annuity provides guaranteed lifetime income through MetLife, but you give up access to your principal
• You can annuitize as little as $3,500 or your entire balance
• Joint life options protect your spouse but reduce your monthly payment
• Most federal retirees combine the TSP annuity with other withdrawal strategies rather than going all-in on one option

What Is a TSP Annuity?

A TSP annuity converts part or all of your TSP balance into guaranteed monthly payments for life. You transfer money to MetLife (the TSP's sole annuity provider), and in return, MetLife pays you a fixed amount every month until you die.

This is different from TSP installment payments, where you keep your money in TSP and withdraw a set amount each month. With installment payments, your balance fluctuates with the market and could run out. With an annuity, the payments continue no matter how long you live.

The trade-off: Once you buy an annuity, the money is gone. You cannot access it as a lump sum, even in emergencies.

TSP Annuity Options at a Glance

The TSP offers several annuity configurations. Here's the breakdown:

Option	What It Means	Best For
Single Life	Payments stop when you die	Maximizing your monthly income if single or spouse has separate income
Joint Life (50%)	Payments continue at half rate to spouse after your death	Married couples wanting some spousal protection at lower cost
Joint Life (100%)	Payments continue at full rate to spouse after your death	Married couples prioritizing spouse protection
Level Payments	Same amount every month, forever	Those who don't need inflation protection
Increasing Payments	Payments grow 2% per year	Those worried about inflation eroding purchasing power
Cash Refund	If you die early, beneficiary gets remaining balance	Peace of mind that you won't "lose" money
10-Year Certain	Payments continue to beneficiary for 10 years minimum	Protecting against early death

Each added feature reduces your monthly payment. A single life annuity with level payments gives the highest monthly amount. A joint life annuity with increasing payments and 10-year certain gives the lowest.

How Much Does a TSP Annuity Pay?

TSP annuity payments depend on:

1. Your age (older = higher payments)
2. Interest rates (higher rates = higher payments)
3. Annuity type (single life pays more than joint life)
4. Payment features (level pays more than increasing)

As a rough example, a 62-year-old with $500,000 might expect:

Option	Approximate Monthly Payment
Single Life, Level	$2,400 - $2,700
Single Life, Increasing	$2,000 - $2,200
Joint Life (100%), Level	$2,100 - $2,400
Joint Life (100%), Increasing	$1,700 - $1,900

Important: These are estimates. Use the TSP Annuity Calculator for current rates based on today's interest rate index.

When the TSP Annuity Makes Sense

1. You Want Guaranteed Income for Life

If the thought of outliving your money keeps you up at night, an annuity eliminates that risk. You cannot run out of payments.

2. You Have Longevity in Your Family

If your parents and grandparents lived into their 90s, you have good odds of a long retirement. An annuity becomes more valuable the longer you live because you keep receiving payments.

3. You Want to Simplify Finances

Managing investments in your 80s and 90s can be challenging. Cognitive decline is real. An annuity removes the burden of investment decisions, leaving you with a predictable deposit every month.

4. Your Other Income Covers Basic Needs

If your FERS pension plus Social Security covers rent, food, and utilities, you might use TSP for discretionary spending. In that case, annuitizing a portion gives you extra guaranteed "fun money" without market risk.

5. Interest Rates Are High

Annuity payouts are tied to interest rates. When rates are high (like now in 2026), you lock in better payments for life. This is a significant consideration if you're deciding between annuitizing now versus waiting.

When the TSP Annuity Does NOT Make Sense

1. You Want Flexibility

Once you annuitize, the money is gone. No lump sum for emergencies, home repairs, medical bills, or helping family. If flexibility matters, keep money in TSP or an IRA.

2. You Have Health Issues

If you have a terminal illness or serious health condition, you may not live long enough to "break even" on the annuity. You'd get more value from a lump sum.

3. You Want to Leave Money to Heirs

Annuities are designed to pay you, not enrich your heirs. Unless you choose cash refund or 10-year certain (which reduce your payments), nothing passes to beneficiaries when you die.

4. Your Spouse Has Their Own Income

If your spouse has their own pension, Social Security, and savings, a joint life annuity may be unnecessary. A single life annuity paying more to you might make more sense.

5. You're Comfortable Managing Investments

If you've successfully managed your TSP for decades and plan to continue in retirement, you may prefer keeping control. The 4% rule suggests you can withdraw 4% annually with low risk of running out over 30 years.

TSP Annuity vs Other Withdrawal Options

The TSP offers five ways to access your money. Here's how the annuity compares:

Option	Control	Guarantee	Best For
Leave in TSP	Full	None	Letting it grow tax-deferred
Installment Payments	Full	None	Predictable withdrawals with flexibility
Lump Sum	Full	None	Rollovers, major purchases, or full control
TSP Annuity	None	Lifetime income	Guaranteed income, longevity protection
Roll to IRA	Full	Depends on IRA investments	More investment options, Roth conversions

Many retirees use a combination. For example:

• 50% TSP Annuity for guaranteed baseline income
• 25% TSP Installments for flexible spending
• 25% Roth IRA for tax-free emergency fund

The Breakeven Question

A common question: "How long until I get my money back from an annuity?"

If you're 62 and buy a single life annuity paying $2,500/month with $500,000, you need 200 months (about 16.7 years) to break even. That means living to 78-79.

But this calculation misses the point. Annuities aren't investments. They're insurance against living too long. You buy them hoping you "lose" by living so long that MetLife pays you far more than you contributed.

Single Life vs Joint Life: The Spouse Decision

If you're married, choosing between single and joint life annuity is critical.

Single life annuity:

• Pays more each month
• Stops completely when you die
• Spouse gets nothing from this income stream

Joint life annuity (100% survivor):

• Pays less each month (typically 10-15% less)
• Continues paying your spouse the same amount after you die
• Protects spouse if you die first

Joint life annuity (50% survivor):

• Pays slightly less than single life
• Continues at half the amount after your death
• Middle ground between protection and payment size

Question to ask: If you die tomorrow, can your spouse maintain their lifestyle without this income? If no, joint life is worth considering.

The "Increasing" Feature: Worth It?

The increasing payment option raises your annuity by 2% each year. This sounds like inflation protection, but there are trade-offs.

Starting payment is lower. You might start at $2,000/month instead of $2,500. It takes years before the increasing annuity catches up.

2% may not match actual inflation. If inflation runs 3-4%, the increasing feature still falls behind.

The crossover takes time. Depending on rates, you might need 10-15 years before total payments from the increasing annuity exceed what you'd have received from level payments.

When it makes sense: If you expect a 25-30+ year retirement and worry about purchasing power in your 80s and 90s.

How to Purchase a TSP Annuity

1. Log into your TSP account at tsp.gov
2. Go to Withdrawals section
3. Select "Annuity" as all or part of your withdrawal
4. Choose your annuity options (single/joint, level/increasing, refund features)
5. Review the estimate and confirm
6. TSP transfers funds to MetLife
7. MetLife sends first payment within 60 days

Minimum purchase: $3,500

Mixed withdrawal: You can combine annuity with lump sum and/or installments in a single request.

Calculate Your TSP Options

Before deciding on an annuity, model your overall retirement income. Use our free TSP Calculator to project your balance growth and compare withdrawal strategies.

Frequently Asked Questions

What is a TSP annuity?

A TSP annuity is a lifetime income option where you transfer some or all of your TSP balance to MetLife, the TSP's annuity provider. In exchange, MetLife pays you a guaranteed monthly amount for life. Once purchased, you cannot access the transferred funds as a lump sum.

Can I buy a TSP annuity with part of my balance?

Yes. You can purchase an annuity with as little as $3,500 and keep the rest in your TSP account. Many retirees use a partial annuity to guarantee essential expenses while keeping remaining funds invested for flexibility.

What happens to my TSP annuity when I die?

It depends on your options. A single life annuity stops at death unless you chose cash refund or 10-year certain features. A joint life annuity continues paying your spouse or joint annuitant at 50% or 100% of the original amount.

Is the TSP annuity a good deal?

It depends on your situation. TSP annuity rates are competitive because the program has low administrative costs. If you need guaranteed lifetime income, have longevity in your family, or want to simplify finances, an annuity can make sense. If you want flexibility or expect to die early, other options may be better.

Can I change my mind after buying a TSP annuity?

No. TSP annuity purchases are irrevocable. Once MetLife receives your funds, you cannot get a lump sum refund. You can stop the purchase only before your money transfers to MetLife.

Related Resources

• TSP Calculator: Project your TSP balance and compare withdrawal strategies
• TSP Guide 2026: Complete guide to contribution limits, funds, and Roth options
• FERS Retirement Calculator: Estimate your federal pension
• TSP Roth In-Plan Conversion Guide: New 2026 conversion rules

Sources

• TSP.gov - Annuity Calculator
• TSP.gov - Withdrawals in Retirement
• TSP Annuity Fact Sheet (PDF)