After a long hiatus (too
long, I know...), TSP Tips is back with a series on TSP annuities. Due
to personal time constraints, this series will be my last. If you're
interested in writing future “Tips,” please let Tom know. Ok, enough
public services announcements—let's get back to the topic.
An annuity is a contract
in which an insurance company pays you for a specified time. Some
annuities are paid for a fixed period, such as 20 years. However, all
TSP annuities are lifetime
annuities. This means the
participant (or annuitant)
receives payments for his or her entire life. In some cases, another
person may receive payments after the original annuitant dies. We'll
cover this in more detail in just a minute.
Now since we're talking
about the TSP, you may be wondering how and why an insurance company
gets involved . Well, annuities are only sold by insurance companies,
and Metropolitan Life Insurance Company (MetLife) is the provider
TSP offers three different annuity types:
Single life. This annuity is only paid
to you over your lifetime.
Life with spouse. This is paid to
you while you're alive. If you pass away before your spouse, it's then
paid to your spouse for as long as he or she lives.
Life with someone other than your spouse.
In this case, someone other than your spouse can receive the payments
after your death. The catch is that this person must have an “insurable
interest” in you. This means they must depend on you to some extent for
their financial well-being. Generally, this person should be an
ex-spouse or a relative who is closer than a first cousin to you.
Next time we'll look at
other annuity features that you can customize. These deal with exactly
how you or your beneficiaries are paid.
John, AKA “SystemTrader”