Federal employees approaching retirement face a decision that can cost or save them $50,000 or more over a 20-year retirement. The question: should you use your TSP to purchase a MetLife annuity directly, or take your TSP balance to the commercial market and buy a Single Premium Immediate Annuity (SPIA)?
The TSP annuity rate is approximately 3.5% — offering a 65-year-old roughly $175/month per $50,000 of TSP balance. Commercial insurers are offering SPIAs at 5–6% or better. That same $50,000 might generate $250–$300/month through a commercial SPIA — a $75–$125 monthly difference that compounds to real money over two decades.
How TSP Annuities Work
The TSP offers three annuity options through its government contract with MetLife: Single Life Annuity, Joint and Survivor Annuity, and Certain and Continuous Annuity. No medical exam is required and FEHB portability is preserved.
The Rate Gap in 2026
TSP MetLife Rate: ~3.5% effective yield — $500,000 → ~$1,750/month at 65.
Commercial SPIA Rate: 5–6%+ — $500,000 → ~$2,083–$2,500/month at 65.
Monthly difference: $333–$750/month. Over 20 years: $80,000–$180,000 in foregone income.
Decision Framework
Choose TSP Annuity if: health concerns, spouse needs survivor coverage, FEHB portability matters, or you want government backing.
Choose Commercial SPIA if: good health, spouse has independent income, maximizing monthly income is priority.
The Bottom Line
Federal retirees in 2026 face the largest TSP vs. commercial SPIA rate gap in over a decade. Run both numbers — compare your options at the Federal Retire Stack.