What to Do with Your TSP at Retirement: How to Turn Your Thrift Savings Plan into Lifetime Income
- Barry Group
- Jun 3
- 3 min read
A comprehensive guide for federal employees, retirees, and uniformed service members.
If you're a federal employee or military service member approaching retirement, you're likely wondering:“What should I do with my TSP now that I’m retiring?”
The Thrift Savings Plan (TSP) has been an excellent tool for accumulating savings. But once you leave federal service, the real challenge begins: turning that TSP balance into reliable income for life.
This article outlines TSP withdrawal options, why many retirees choose to roll their TSP into a Fixed Index Annuity (FIA), and how to create guaranteed lifetime income with market protection.
🔍 Why It’s Crucial to Have a TSP Income Plan
Retirees today face a number of financial risks:
Living longer than expected
Market downturns
Rising healthcare and living costs
According to the Society of Actuaries, a 65-year-old today has a 50% chance of living past age 85. Without an income strategy, your retirement savings could run out when you need them most.
🏛 What Is the TSP?
The Thrift Savings Plan (TSP) is a government-sponsored retirement plan similar to a 401(k), used by:
Federal employees (FERS and CSRS)
Uniformed service members
Military reservists and National Guard personnel
While the TSP is a great savings vehicle, it doesn’t provide guaranteed lifetime income once you retire. That’s where an income strategy is critical.
🧾 TSP Withdrawal Options Explained
When you separate from federal service or retire, you have several options for accessing your TSP funds:
✅ 1. Keep Your Funds in the TSP and Withdraw as Needed
You can leave your money in the TSP and:
Take monthly payments
Make one-time partial withdrawals
Begin Required Minimum Distributions (RMDs) at age 73
Pros:
Low administrative fees (~0.06%)
Familiar platform and tools
Cons:
No protection from market downturns
No guaranteed lifetime income
Requires active management
Learn more at TSP.gov »
✅ 2. Rollover to an IRA or Fixed Index Annuity
A popular and flexible strategy is to roll your TSP into an IRA, and from there, into a Fixed Index Annuity (FIA).
An FIA offers:
Protection from market losses
Guaranteed lifetime income
Tax-deferred growth
Access to beneficiaries if you pass away
Many federal retirees use FIAs to turn their TSP into a personal pension they can never outlive.
📊 Example: Rollover to a Fixed Index Annuity
Let’s say you retire at 62 with $350,000 in your TSP.
You roll it into a Fixed Index Annuity with a guaranteed income rider. By 65, your contract may guarantee:
$28,000–$30,000/year for life
Continued growth based on a stock market index (without the risk of losses)
All unused balance passes to your heirs
🔐 Why Federal Retirees Choose FIAs
Here are the top reasons many federal employees are rolling over their TSPs into FIAs:
✅ 1. Market Loss Protection
FIAs are not invested directly in the market. Your principal is protected from downturns, giving peace of mind in volatile times.
✅ 2. Guaranteed Lifetime Income
With an income rider, you can lock in a guaranteed monthly income for life — even if your account runs out.
✅ 3. Growth Potential
You earn interest based on a stock market index (like the S&P 500), up to a cap or participation rate.
✅ 4. Legacy Planning
Unlike certain government annuities, any unused balance in a FIA can go directly to your beneficiaries.
✅ 5. Tax Deferral
When rolled into a Traditional IRA, your FIA continues growing tax-deferred, with RMDs starting at 73.
⚠️ Mistakes to Avoid with Your TSP
Taking a lump sum withdrawal and triggering heavy taxes
Relying solely on TSP mutual funds during retirement
Not coordinating your TSP with Social Security and pension benefits
Ignoring the effects of market volatility on your drawdown strategy
Not exploring private annuity options that may offer higher income or greater flexibility
📆 When to Consider a TSP Rollover to a FIA
Consider this option if you:
Are age 59½ or older (or separated from service)
Want income for life that you can't outlive
Are concerned about market risk
Want to avoid the limited income options inside the TSP
📞 Ready to Turn Your TSP into Lifetime Income?
At Barry Group & Associates, we help retiring federal workers, postal employees, and military members roll over their TSP into Fixed Index Annuities to create protected, guaranteed income for life.
📲 Call 866-540-9122 for a FREE Discovery Session🌐 Or visit www.barrygroup.net to learn more
📚 Sources:
TSP – Withdrawal Options
IRS Publication 575 – Pensions and Annuities
U.S. Government Accountability Office (GAO) – Retirement Security Reports
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