Taking an annuity instead of TSP balance

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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?
 
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.
 
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
 
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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!
 
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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 ?
 
If you are disciplined, keep the money, invest it conservatively, and you will get similar monthly payments AND keep the principal.
 
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.
 
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.
 
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
 
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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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...
 
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.
 
Grampi - since we're talking TSP, I have to assume that you're a GS.

Have you been through the GS retirement training? Two days, and actually quite good (my wife and I went through the course last month).

Your organization should pay for it, and they answer all of these questions. There are pros/cons to both options, and you need to understand more of the pros of keeping your TSP to be able to make this decision. Just remember, if you're talking to a salesperson about an annuity, they stand to make a big commission on your decision to buy the annuity with your TSP balance. That's not a neutral party, then, and you need to understand that.

To help answer your question, I would need to understand the context of your financial position. It's not just "annuity good" or "annuity bad", it's a question of what other fixed income (e.g. military pension, SS, etc.) you have, your complete portfolio outside of the TSP, and your debt/finances. All of those factors must be considered to inform the annuity decision.
 
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Originally Posted By: Astro14
Grampi - since we're talking TSP, I have to assume that you're a GS.

Have you been through the GS retirement training? Two days, and actually quite good (my wife and I went through the course last month).

Your organization should pay for it, and they answer all of these questions. There are pros/cons to both options, and you need to understand more of the pros of keeping your TSP to be able to make this decision. Just remember, if you're talking to a salesperson about an annuity, they stand to make a big commission on your decision to buy the annuity with your TSP balance. That's not a neutral party, then, and you need to understand that.

To help answer your question, I would need to understand the context of your financial position. It's not just "annuity good" or "annuity bad", it's a question of what other fixed income (e.g. military pension, SS, etc.) you have, your complete portfolio outside of the TSP, and your debt/finances. All of those factors must be considered to inform the annuity decision.


Yes I am a GS, and I have been through the two day retirement seminar.

When I retire my pensions will be military, FERS, VA disability compensation, SS, and whatever I end up drawing from my TSP. The only debt I will have upon retirement is my mortgage.
 
Originally Posted By: surfstar
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.

Sure, a TSP annuity probably has a more favorable cost structure than one you'd get on the street. Same as its investment funds. But the annuity itself is still a purchased financial product with the same general pros and cons as any other.

If you want to "cash out" of the market you can just switch all your holdings to the G fund.

grampi's going to have several defined benefit income streams per his latest post so it's not clear at all that another would be appropriate. If he's risk averse he could just switch everything to the G fund, take his minimum withdrawals, and put the money into CDs/bonds/etc or buy a Porshce
smile.gif
 
Originally Posted By: greenjp
Originally Posted By: surfstar
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.

Sure, a TSP annuity probably has a more favorable cost structure than one you'd get on the street. Same as its investment funds. But the annuity itself is still a purchased financial product with the same general pros and cons as any other.

If you want to "cash out" of the market you can just switch all your holdings to the G fund.

grampi's going to have several defined benefit income streams per his latest post so it's not clear at all that another would be appropriate. If he's risk averse he could just switch everything to the G fund, take his minimum withdrawals, and put the money into CDs/bonds/etc or buy a Porshce
smile.gif



Does the G fund ever drop in value?
 
Originally Posted By: grampi
Does the G fund ever drop in value?

Nope. Per the TSP site: "The G Fund assets are managed internally by the Federal Retirement Thrift Investment Board. The G Fund buys a nonmarketable U.S. Treasury security that is guaranteed by the U.S. Government. This means that the G Fund will not lose money." FWIW the 10 year average annual return from 2006-2016 was 2.63%. I suppose if that's lower than the inflation rate that'd be a loss of sorts but the absolute value will not decrease.

Another option would be one of the L funds, which are composed of a mix of the other offered funds and are automatically adjusted to lower risk holdings as the specified retirement date approaches. So you could put it all in the say the L2020 which would probably be heavy on the G and F funds but still leave some in the stock funds.
 
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