What do I do with TSP when I retire? FedSmith provides TSP income options:

 (1) Set up monthly withdrawals from TSP, (2) Create an annuity with TSP through MetLife, or (3) Rollover TSP to an IRA

If you leave your money with TSP once you retire, you can create income by taking monthly withdrawals.  The pros are: you continue to enjoy the low fees that TSP offers, and you can change the amount of your monthly check every January. The cons are: you can only make changes to your monthly check in January. Imagine you’re retired and receiving a monthly check from your TSP account.  You have an unexpected emergency and need to repair your roof, or you need to buy a new car, or your daughter is getting married and you have the pleasure of assisting with the wedding costs.  You call TSP and ask them to send you a lump sum check.  Guess what!  They will not allow it.  Your choices are to make a change to your monthly withdrawals in January or be forced to take the entire balance out of your TSP account.  What if you want to stop your withdrawals?  Let’s assume you are receiving a monthly check from TSP and come September, you realize you do not need this much income from TSP, because you are simply paying the tax and depositing the remainder into your bank account.  And, the very next payment will dump you into a higher tax bracket.  So you call TSP and request that they stop your monthly withdrawals until January of the next year.  And guess what?  That is not an option.  So you see, for many retirees scheduling monthly withdrawals from TSP may be a great way to supplement your income, for others, they do not want to live within the restrictions of TSP. 

The second option you have is to create a lifetime annuity from your TSP through a MetLife annuity.  The pros are: you can have a guaranteed payment over your life as well as a joint life with your spouse or someone that has an insurable interest with you.  If you are worried about the volatility in the market causing you to run out of money during your retirement, you can be worry free because MetLife can guarantee income over your lifetime. The cons are: it’s an irrevocable decision.

The third option is to rollover TSP into an IRA.  The pros are: you have more choices than the 5 funds offered through TSP, you can have more flexibility as to how you take withdrawals, and you can manage the IRA yourself or have a professional manage it for you.  The cons are: you may not have the knowledge or experience to know how to manage the IRA, the choices available may be overwhelming and you may find yourself taking on more risk than you are comfortable with, and you will very likely be paying higher fees than those of TSP.