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Taking an annuity instead of TSP balance #4607954
12/19/17 09:14 AM
12/19/17 09:14 AM
Joined: Oct 2006
Posts: 8,004
OH
grampi Offline OP
grampi  Offline OP
Joined: Oct 2006
Posts: 8,004
OH
After doing some research on the subject, most people say not to trade my TSP balance for an annuity. However, in my case, an annuity may be a better option. I plan on using my TSP by taking a fixed amount every month. I don't plan to ever take a large payment from my TSP. The way I understand how an annuity works is once you start it, the amount you draw each month remains the same for the rest of your life, and the rest of your spouse's life, if you choose to take the survivor benefit. If I choose not to take an annuity and I keep my balance in the TSP, that money is still subjected to take big losses if/when the market fluctuates. I know I'd be giving up my balance if I choose to take an annuity, but there's also some piece of mind in doing so, knowing that my monthly annuity payment will never decrease, or worse yet, be completely gone due to the market tanking. What are your thoughts on this?

Re: Taking an annuity instead of TSP balance [Re: grampi] #4607977
12/19/17 09:44 AM
12/19/17 09:44 AM
Joined: Mar 2004
Posts: 20,752
Upstate NY
Donald Online content
Donald  Online Content
Joined: Mar 2004
Posts: 20,752
Upstate NY
If you do not take an annuity you should have 5yr to 8yr worth of payments you will take in safe investments and the rest in an index stock mutual fund.

You do not want to need to take payments out of a stock mutual fund when the market has tanked.


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Re: Taking an annuity instead of TSP balance [Re: grampi] #4607980
12/19/17 09:46 AM
12/19/17 09:46 AM
Joined: May 2009
Posts: 12,187
N.H, U.S.A.
ARCOgraphite Offline
ARCOgraphite  Offline
Joined: May 2009
Posts: 12,187
N.H, U.S.A.
Cost of living is not fixed, what about catastrophic needs for funds? What about family need after you and spouse are gone? Stuff happens; or as Lennon put it so succinctly, "Life is what happens whilst you are making other plans."**

Me, being 1/2 Scot, I'm NOT going to give an annuity sales person 10% (10,000.00 per 100K) to sell me this thing.

My, Mom had 300K in an annuity during the market crash in the mid 2000's Couldnt have had better timing; I did sell them due to uncertanty in the stability and solvency of the Insurance co's. during massive bank failures.

I would find a short term bond mutual fund and/or that earns about 4-6 %, open a brokerage account, and just leave it in there and draw what you need. This market bubble is about to bust. WAY over valued cant sustain, and many huge B&M are bankrupt. Looks bad for mid 2019.
____________________________________

** orig attrib to Saunders



Last edited by ARCOgraphite; 12/19/17 09:50 AM.

2014 Nissan Rogue S CVT, OC#9 41392mi-QSUD10W30 + M110A CHAMP Filter; 2017 Subaru Crosstrek CVT OC#2 ?? mi-SOA/Idemitsu 0w20 + SOA Filter
Re: Taking an annuity instead of TSP balance [Re: grampi] #4607981
12/19/17 09:47 AM
12/19/17 09:47 AM
Joined: Oct 2009
Posts: 3,209
Wet side WA
JohnnyJohnson Offline
JohnnyJohnson  Offline
Joined: Oct 2009
Posts: 3,209
Wet side WA
All annuities are loaded more or less. You will have very little earning power. Roll it into an IRA of some kind like Fidelity where you can invest in something that has a chance of making some money. Don't listen to the annuity lie!

With the way over bought market right now find a short term solution that protect your money. When the market falls on it face then dollar cost average your way back into the market. Don't look for get rich quick schemes like Bitcoin!

Last edited by JohnnyJohnson; 12/19/17 09:51 AM.

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Re: Taking an annuity instead of TSP balance [Re: grampi] #4607994
12/19/17 10:07 AM
12/19/17 10:07 AM
Joined: May 2003
Posts: 7,321
Oklahoma
Schmoe Offline
Schmoe  Offline
Joined: May 2003
Posts: 7,321
Oklahoma
That's what I'm planning on doing.


01 Supercrew Lariat 4X4
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Re: Taking an annuity instead of TSP balance [Re: JohnnyJohnson] #4608010
12/19/17 10:15 AM
12/19/17 10:15 AM
Joined: Sep 2004
Posts: 21,626
Orlando, FL
Mr Nice Offline
Mr Nice  Offline
Joined: Sep 2004
Posts: 21,626
Orlando, FL
Originally Posted By: JohnnyJohnson
All annuities are loaded more or less. You will have very little earning power. Roll it into an IRA of some kind like Fidelity where you can invest in something that has a chance of making some money. Don't listen to the annuity lie!

I agree to avoid any annuity. What is the balance of TSP ?


Re: Taking an annuity instead of TSP balance [Re: grampi] #4608023
12/19/17 10:29 AM
12/19/17 10:29 AM
Joined: Aug 2003
Posts: 3,608
lllinois
salesrep Offline
salesrep  Offline
Joined: Aug 2003
Posts: 3,608
lllinois
If you are disciplined, keep the money, invest it conservatively, and you will get similar monthly payments AND keep the principal.


High quality Specialized Lubricants pay for themselves!
Re: Taking an annuity instead of TSP balance [Re: grampi] #4608053
12/19/17 10:55 AM
12/19/17 10:55 AM
Joined: May 2002
Posts: 1,367
St. Charles County, Missouri
csandste Offline
csandste  Offline
Joined: May 2002
Posts: 1,367
St. Charles County, Missouri
My girl friend (before I met her) ran into a scammy annuity salesman-broker who stuck a bunch of her money into variable annuities, including placing annuities into IRA's (aaagh!). I got her to switch everything possible into the cheapest Schwab index products (she wanted a local office). The annuities, however, had to roll over because of tax considerations, although to considerably cheaper products.

The Schwab guy, who runs the only office in a county of 400,000, knew nothing about annuities because he had never sold one. People who look out for their clients don't sell annuities, and annuities ARE sold. No body in their right mind (IMO) would put money into a product like that unless they are hoodwinked by someone who's looking to grab a ton of hidden money on the sale.


2017 Kia Soul Plus-- Valvoline MaxLife Blend 5-20, 48,000 miles.
Re: Taking an annuity instead of TSP balance [Re: grampi] #4608056
12/19/17 10:58 AM
12/19/17 10:58 AM
Joined: Sep 2004
Posts: 21,626
Orlando, FL
Mr Nice Offline
Mr Nice  Offline
Joined: Sep 2004
Posts: 21,626
Orlando, FL
Time expired and I couldn't edit.

REITs pay 9-13% dividends, some pay monthly and others pay quarterly.
Lots of retired folks like that nice steady cash flow $$$...

Annuities are a big No-No, lots of fees and you might get penalized (more $$$ fees) to pull your money out.

Re: Taking an annuity instead of TSP balance [Re: grampi] #4608067
12/19/17 11:10 AM
12/19/17 11:10 AM
Joined: May 2004
Posts: 1,310
Germantown, MD
greenjp Offline
greenjp  Offline
Joined: May 2004
Posts: 1,310
Germantown, MD
I think you need to look a little closer at your TSP options (I'm assuming you're talking about a federal gov't Thrift Savings Plan?). You can move any portion of your current balance into the G fund which is essentially a federal bond fund with zero risk of losing principle. TSP management costs are very low so it's unlikely there's anything to be gained from moving it out and into a private type account.

jeff

Re: Taking an annuity instead of TSP balance [Re: JohnnyJohnson] #4608084
12/19/17 11:25 AM
12/19/17 11:25 AM
Joined: Oct 2011
Posts: 2,975
Chicago, IL
Brybo86 Offline
Brybo86  Offline
Joined: Oct 2011
Posts: 2,975
Chicago, IL
Originally Posted By: JohnnyJohnson
All annuities are loaded more or less. You will have very little earning power. Roll it into an IRA of some kind like Fidelity where you can invest in something that has a chance of making some money. Don't listen to the annuity lie!

With the way over bought market right now find a short term solution that protect your money. When the market falls on it face then dollar cost average your way back into the market. Don't look for get rich quick schemes like Bitcoin!

This times one BILLION
Annuities are only good for the person who is SELLING THEM


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Re: Taking an annuity instead of TSP balance [Re: grampi] #4608087
12/19/17 11:26 AM
12/19/17 11:26 AM
Joined: Sep 2004
Posts: 5,998
Santa Barbara, CA
surfstar Offline
surfstar  Offline
Joined: Sep 2004
Posts: 5,998
Santa Barbara, CA
I think there needs to be clarification here:

"Taking an annuity" - is a way of accessing your TSP balance, it is NOT buying a private/open market annuity. That is what everyone is assuming.

https://www.tsp.gov/PlanParticipation/LoansAndWithdrawals/annuities/options.html


OP, get a pot of coffee and some free time and read as much as you can intake:
TSP annuity search at Bogleheads.org

Last edited by surfstar; 12/19/17 11:29 AM.

2016 Golf Sportwagen 5MT M1 0w40 LC20 RLI BioPlus
my other vehicle is a Roth IRA
Re: Taking an annuity instead of TSP balance [Re: Mr Nice] #4608089
12/19/17 11:27 AM
12/19/17 11:27 AM
Joined: Oct 2006
Posts: 8,004
OH
grampi Offline OP
grampi  Offline OP
Joined: Oct 2006
Posts: 8,004
OH
Originally Posted By: Mr Nice
Originally Posted By: JohnnyJohnson
All annuities are loaded more or less. You will have very little earning power. Roll it into an IRA of some kind like Fidelity where you can invest in something that has a chance of making some money. Don't listen to the annuity lie!

I agree to avoid any annuity. What is the balance of TSP ?



It will be ~ 160K when I retire...

Re: Taking an annuity instead of TSP balance [Re: grampi] #4608107
12/19/17 11:35 AM
12/19/17 11:35 AM
Joined: May 2004
Posts: 1,310
Germantown, MD
greenjp Offline
greenjp  Offline
Joined: May 2004
Posts: 1,310
Germantown, MD
A TSP annuity is no different from a private one. It's just arranged via TSP and issued by MetLife.

Re: Taking an annuity instead of TSP balance [Re: greenjp] #4608110
12/19/17 11:38 AM
12/19/17 11:38 AM
Joined: Sep 2004
Posts: 5,998
Santa Barbara, CA
surfstar Offline
surfstar  Offline
Joined: Sep 2004
Posts: 5,998
Santa Barbara, CA
Originally Posted By: greenjp
A TSP annuity is no different from a private one. It's just arranged via TSP and issued by MetLife.

Because of the vast purchasing power of the Feds, its likely that it has lower fees and/or is similar to a private one that would require much research to insure that the purchaser is not being taken by a salesman.


Grampi, have you read: https://www.tsp.gov/PDF/formspubs/tspbk02.pdf yet?

Because of all-time market highs, it is a very good time to "cash out" and "buy" an annuity. There is that. You may miss out on future returns, but you would be locking in all of the recent run-up.

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