Best Annuity for Federal Employees Rolling the TSP (2026)

TL;DR: A FERS retiree usually keeps their three-legged stool intact (FERS pension + Social Security + TSP) and uses a MYGA or partial SPIA only on the TSP rollover dollars. The G Fund is competitive with short MYGAs but loses to 5 to 7 year MYGAs by 100 to 175 basis points. Roll the pre-tax balance into a traditional IRA first, then place the annuity there; keep the Roth TSP intact unless you have a specific reason. Watch IRMAA cliffs at 73 when RMDs start.

Why your situation is different from a private-sector retiree

You already have two of the three retirement income legs locked in: the FERS basic annuity (defined benefit, COLA-adjusted at 62) and Social Security. The TSP is the only piece you control on the way out. That changes the math.

A private-sector 401(k) holder often needs an annuity to create income certainty. A FERS retiree usually has enough fixed income from the pension and Social Security to cover essentials. The TSP rollover is for either: (1) inflation-fighting growth, (2) discretionary spending, or (3) heirs. An annuity helps with cases (2) and (3); it can hurt case (1) if oversized.

The other distinction: the TSP G Fund. It pays a special-issue Treasury rate, around 4.25 percent in 2026, with no market risk and full liquidity. That's a real competitor to a 3 year MYGA. It loses to a 5 or 7 year MYGA by enough that the trade is worth doing on a portion of the balance.

Pre-tax versus Roth split: roll only what you should

Your TSP has two buckets:

• Traditional TSP (pre-tax). Roll into a traditional IRA. This is where a MYGA or SPIA goes if you want one. Distributions are fully taxable.
• Roth TSP (post-tax contributions + tax-free growth). If you've held it 5+ years and you're 59½+, distributions are tax-free. You generally do NOT want to annuitize Roth dollars unless you have a clear estate-planning reason, because you give up the tax-free growth that makes Roth valuable.

The pro-rata distribution rule for TSP withdrawals means you can't just pull from one bucket. Most FERS retirees do a full rollover: traditional TSP → traditional IRA, Roth TSP → Roth IRA. Two separate accounts. Annuity strategy applies only to the traditional IRA side.

G Fund versus MYGA: when each wins

The G Fund pays roughly the weighted average yield on outstanding Treasuries with 4+ years to maturity, reset monthly. In 2026 that's running around 4.25 percent. It has zero market risk and you can move money out of it any business day. It's the safest dollar in your TSP.

A 5 year MYGA from an A-rated carrier in mid-2026 pays 5.55 to 5.85 percent. A 7 year MYGA pays 5.65 to 6.00 percent. That's 130 to 175 basis points over the G Fund, locked. On a $400,000 rollover, 150 bps is $6,000 per year. Over 7 years that's roughly $48,000 of extra compounding versus G Fund.

The cost: you give up daily liquidity for 5 or 7 years. Most MYGAs allow a 10 percent per year free-withdrawal, so you're not 100 percent locked, but the bulk is.

Top 3 MYGA carriers writing for FERS rollovers (mid-2026)

1. Athene — AM Best A+. MaxRate series. Top of the 5 and 7 year shelf most months in 2026. Apollo-owned, which is a fair conversation to have, but balance-sheet metrics are strong.
2. Corebridge Financial — AM Best A. American General. Competitive 5 year and 7 year, often with a small premium credit on $250K+. Spun out of AIG, fully independent capital structure now.
3. American National — AM Best A. Palladium MYG series. Consistent renewal rate integrity (matters because some carriers slash the renewal rate after year 1 of a multi-year contract, even if you didn't think they could).

These three rotate at the top of the shelf monthly. The "best" carrier on your contract date is whichever has the top rate for your bucket size and term that week. A 25-basis-point difference on $400K over 7 years is $7,000. It's worth shopping it that week.

How to integrate with the FERS pension and Social Security

The FERS pension is roughly 1.0 percent or 1.1 percent (age 62+ with 20 years) per year of service, on your high-3 salary, with diet-COLA after 62. Social Security is whatever it is. Add those two. Subtract your essential expenses. Whatever's left over (positive or negative) tells you what the TSP needs to do.

Common pattern: FERS pension + SS covers 70 to 90 percent of essentials. The TSP rollover doesn't need to generate guaranteed lifetime income because the pension already does. So a MYGA ladder (rather than a SPIA) is usually the right move: it keeps principal accessible, generates predictable interest, and is heritable.

If pension + SS covers less than essentials (rare for full-career FERS), a partial SPIA on the gap makes sense. Annuitize the smallest dollar amount that closes the gap. Leave the rest in a MYGA ladder or growth vehicles.

The IRMAA trap most FERS retirees walk into

At 73, RMDs from your IRA start. If your IRA grew well from age 62 to 73, the RMD can push your MAGI over the IRMAA brackets, jacking up Medicare Part B and Part D premiums by $70 to $400+ per month for both you and your spouse. The TSP itself has the same RMD rule.

Annuitizing a piece of the IRA via a SPIA or DIA before 73 can smooth out the RMD by converting a chunk of "stuff that has to RMD" into a fixed monthly income stream. The income stream still counts toward MAGI, but the level is predictable, so you can run the math and stay just under the cliff.

The other lever: Roth conversions between 62 and 73, paid for from non-IRA cash. Done in years where you're in the 22 or 24 percent bracket but well under the IRMAA cliff, you reduce future RMDs dollar-for-dollar. Conversions and annuitization together work better than either alone.

Common mistakes federal employees make on the rollover

1. Rolling the whole TSP day one. No tax reason to. You can leave it at TSP indefinitely and roll piecemeal as you need to. The G Fund is unique to TSP; you can't replicate it.
2. Buying a variable annuity sold by the local guy. Variable annuities have 2-3 percent annual fees and complex riders. Wrong product for a FERS retiree who already has a guaranteed pension.
3. Ignoring the carrier's renewal rate history. A 5 year MYGA only pays the headline rate for year 1 sometimes; multi-year guarantees lock it, but make sure the contract says "multi-year guarantee" not "1 year guarantee with renewal."
4. Putting the annuity in a Roth IRA. Wastes the tax shelter. Annuity tax deferral inside a Roth is redundant. Annuities go in traditional IRAs or non-qualified accounts.
5. Stacking too much in one carrier. State guaranty funds typically cap coverage at $250K to $300K per owner per carrier. Split a $500K rollover across two carriers.

Worked example: $400,000 traditional TSP rollover, age 62

Marie, 62, FERS, 30 years service. Pension $52K/year, starts taking Social Security at 67 for ~$32K. TSP balance: $620K (traditional) + $90K (Roth). Essentials ~$70K/year. She wants the TSP working but doesn't want to ride the S&P.

Three MYGA carriers, each under the state guaranty cap, average yield ~5.65 percent on $400K of the rollover. Year 1 interest on the MYGA stack: ~$22,600. Year 3 the short MYGA matures — she ladders into a fresh 5 year at whatever the rate is then. Growth bucket stays exposed to the market for inflation defense. Roth stays untouched for late-life or heir use.

Should you take TSP as monthly payments instead?

The TSP itself offers "monthly payments based on life expectancy" or a TSP annuity through MetLife. Both have fewer features and lower flexibility than a private-market SPIA or MYGA. The TSP annuity rates are not consistently competitive. For most retirees: roll out, then decide. The TSP is great for accumulation; the private annuity market is better for distribution.

Related reading

• Best annuity for military retirees (TSP + pension + VA)
• Best annuity for postal workers (USPS / CSRS / FERS)
• How much does a $100K annuity pay per month?
• What's the biggest disadvantage of an annuity?
• Annuity vs stable value fund (401k strategy)

Frequently Asked Questions

Can I keep money in the TSP indefinitely after I retire?

Yes. Federal employees can leave the TSP balance in place indefinitely after separation, subject to RMDs starting at age 73. The G Fund alone is a reason to keep some balance at TSP rather than rolling 100 percent out.

Does the TSP annuity (MetLife) beat a private SPIA?

Rarely. The TSP annuity rates are quoted off a fixed methodology that is often 5 to 15 percent below the top of the private SPIA market in the same week. Always quote both before deciding.

Can I roll my TSP into an annuity at age 55 under the FERS Special Provisions retirement?

Yes, but the rollover itself is a direct trustee-to-trustee transfer (no tax), and the annuity is held inside an IRA. If you take distributions from the annuity before 59½ the 10 percent penalty applies (with limited exceptions like 72(t) substantially equal periodic payments).

Will the MYGA interest push me into IRMAA?

Interest credited inside a deferred MYGA in an IRA is not taxed until withdrawal. So it does not affect IRMAA in the years it's credited. RMDs from the IRA at 73 do count toward MAGI. Plan around it.

Are MYGAs covered by FDIC?

No. MYGAs are insurance contracts, not bank deposits. They're covered by the state insurance guaranty association in your state of residence, typically up to $250K to $300K per owner per carrier. Always check your specific state limit before placing a large position.

Should I buy an annuity inside my Roth IRA?

Usually no. Annuities provide tax deferral; the Roth already provides tax-free growth and tax-free withdrawals. Stacking the two wastes the tax shelter. The only common reason to put an annuity in a Roth is for guaranteed lifetime income with tax-free payout, and even then there are usually better structures.

How long do I have to roll my TSP after separating from federal service?

There's no hard deadline. You can leave the balance at TSP or roll at any time. RMDs at 73 force the issue, but otherwise it's at your discretion.

What about the FERS supplement? Does that affect annuity planning?

The FERS supplement is paid to FERS retirees between MRA and 62, mimicking Social Security. It stops at 62 whether or not you claim SS. Plan for the income drop at 62 by either claiming SS or having a MYGA / SPIA payout bridge that gap.

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Disclosure

This article reflects publicly available product materials and approximate rates as of the date stated above. Annuity rates, caps, participation rates, payout factors, crediting methods, and tax rules change frequently. Always confirm current values against the most recent carrier disclosure document and the actual contract before purchasing. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product, nor is it tax or legal advice. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity and long-term care insurance market; specific appointment status with any carrier discussed may vary, and discussion of a carrier is not an endorsement or representation of carrier appointment. No compensation has been received from any carrier in connection with the publication of this article. Always read the actual contract and consult a licensed advisor and a CPA or tax attorney before purchasing any annuity or making rollover decisions. Annuities are long-term contracts with surrender charges; they are not suitable for funds you may need before the end of the surrender period. AM Best ratings, payout factors, and tax treatment are subject to change. References to the TSP, FERS, CSRS, OPM, USPS, Social Security, IRMAA, WEP/GPO, IRC §72, §453, and §1035 reflect rules as of 2026 and are subject to change.