Taking an annuity instead of TSP balance

[grampi]

Originally Posted By: greenjp
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.





I have it in the 2020 fund now...

 

[greenjp]

Ok so at the moment here's what your mix is (this is all from the site):
G - 57%
F - 6%
C - 20%
S - 5%
I - 11%

When 2020 hits you'll be automatically switched to the L "Income" fund if you don't do anything. That mix is fixed as follows:
G - 74%
F - 6%
C - 11%
S - 3%
I - 6%

 

[Astro14]

Originally Posted By: grampi
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.


You've got a much higher percentage of your total retirement income coming from pensions than most...so, for that reason, I would suggest that you NOT do the annuity conversion of the TSP. Keep the TSP as is.

You've got some great pension income, use the TSP when/as needed. Having a big cash reserve from which you can draw for unanticipated expenses gives you more flexibility. You can leave it alone until you're 70 1/2, or you can take out what you need each year on a case by case basis. Having the TSP in its current form would be my recommendation.

Now, if you really will sleep better at night with a fixed income conversion, which makes you a very conservative investor, then by all means, sleep better.

But if it were mine, I would keep it in its current form.

FWIW - Between my wife and I, we will have 1 GS pension, 2 military pensions, a very modest PBGC payout, and SS. We plan to keep the IRAs, TSPs (all three) and the 401(k) in their present form: mutual funds for precisely that flexibility.

 

[grampi]

Originally Posted By: Astro14
Originally Posted By: grampi
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.


You've got a much higher percentage of your total retirement income coming from pensions than most...so, for that reason, I would suggest that you NOT do the annuity conversion of the TSP. Keep the TSP as is.

You've got some great pension income, use the TSP when/as needed. Having a big cash reserve from which you can draw for unanticipated expenses gives you more flexibility. You can leave it alone until you're 70 1/2, or you can take out what you need each year on a case by case basis. Having the TSP in its current form would be my recommendation.

Now, if you really will sleep better at night with a fixed income conversion, which makes you a very conservative investor, then by all means, sleep better.

But if it were mine, I would keep it in its current form.

FWIW - Between my wife and I, we will have 1 GS pension, 2 military pensions, a very modest PBGC payout, and SS. We plan to keep the IRAs, TSPs (all three) and the 401(k) in their present form: mutual funds for precisely that flexibility.


I think you're right, and I will probably do the same...it's good to get input on this stuff...