Confused about ANNUITIES [Archive]

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DDT

11-28-2006, 01:58 PM

Brett

11-28-2006, 02:12 PM

Some one can correct me if I'm wrong, but a recent IRA rule change allows your daughter (up till now it had to be a spouse) to inherit with no tax penalty.

Spaf

11-28-2006, 02:47 PM

:blink: New to TSPtalk... and now confused after reading TSP Tips dated 9/18/06. Single life. This annuity is only paid to you over your lifetime -
Since I can't designate my daughter as a Joint Life recipient, I have named her as beneficiary in my will to receive all monies left in my TSP account. Is this the correct thing to do or should I be moving the monies out of TSP into CDs, Money Markets, etc? :confused: I don't want her to lose this money!
Thank you,
DDT

Annuities are an insurance that you purchase. Government employees already have one through the retirement system. I can't see using real money to buy another annuity when that money is setting in an account that has many options, and the ability to grow at a faster rate than CDs and M-Mkts.

Having that $$ available in TSP (even in L-income) is a good safety blanket for the future. Withdrawls at 4% or less will probably never touch the principal, and allow an inflation factor.

TSP can send you the forms for designating whomever, I know it's on the TSP-70.

Before opting out of TSP, suggest reading TSP Features ch#13, Getting Your Money Out After You Seperate.

Regards

Spaf

DDT

11-28-2006, 02:53 PM

That's why I was confused after reading that article...
I already have designated my daughter as beneficiary using the TSP form and also in my will. That is sufficient, correct?

Thanks for your replies!!!:)

CountryBoy

11-28-2006, 02:58 PM

There was a very interesting question in the Q & A section of the Dec 2006 NARFE Mag. A FERS employee was looking into a Met Life annuity to purchase with his TSP Money, but he was worried about never being able to change his money back. NARFE responded by saying “that less than 2% of TSP Folks elect the annuity option. The main disadvantage is once your funds are transferred to Met life you no longer have control “ also that “most members choose a monthly distribution from there TSP account based on their needs. The monthly distribution can be changed once each year. You can continue to move your TSP balance from one fund to another. You may want to look at the booklet “Withdrawing Your TSP Account After Leaving Federal Service” at www.tsp.gov .

I’m about 8 years from retirement and will not put any of my money into an annuity. The only advantage an annuity has is a guaranteed monthly amount and once you die the money disappears. You can get a joint annuity, so your spouse can continue to receive money, but I think it may be at a reduced amount.

There are a couple of threads here talking about retirement. I was going to get an annuity also, but the more I researched it and learned from the guys here, there would be no way I’d get one, but then that’s just me. We all have different circumstance and needs.

CB

Wheels

11-28-2006, 06:23 PM

The main disadvantage is once your funds are transferred to Met life you no longer have control “ .........

.........The only advantage an annuity has is a guaranteed monthly amount and once you die the money disappears.

In actuality, the money is gone immediately. You are not moving your money into an annuity, you are buying an annuity from Met Life. Your account balance is gone the second you purchase the annuity. In return you get a guaranteed monthly amount of money. If you live to be 135 or so, you would probably make out pretty well on it, otherwise Met Life usually makes out a little better than you do.

Spaf

11-28-2006, 11:55 PM

Annuities
Something in retrospect!
I worked for the AEtna Insurance Company years back and had an annuity. It was with Conneticut General, CG sold that operation to Conneticut General Insurance Company of North America (CIGNA). CIGNA later sold the pension plan annuity operation to Prudential Finance. Not that these transfers were bad, but, sometimes, companys that are in the red, buy companies in the black to get a better book of business. The take over can be hostile. The TSP is a semi-government operation, of which I would think would be more secure. This is MHO, in retrospect.
Spaf

vol46

12-20-2006, 08:50 AM

Don't suppose there is any way we can get that govt. annunity rolled over into our TSP accounts?
Wishfull thinking,
Vol46

12-22-2006, 04:48 AM

Not an HR expert or lawyer, but, as long as your beneficiary has a vested interest in you (e.g., daughter) you should be able to identify her as your beneficiary. Depending on her age it could reduce your annuity by a lot. Check it out with HR and let us know.

Thanks.

Ed

Birchtree

12-22-2006, 12:50 PM

Vol46,

You can only get that money into your TSP plan if you are offered a defined contribution plan. My wife has one with her state job and she will retire with more money than any defined benefit plan could offer - and it's her money immediately. Of course she is subject to the vagaries of the markets with the inherent risks - but she has me looking over her shoulder.

Birchtree

12-22-2006, 12:54 PM

Vol46,

I would not be surprised to see the military start to offer defined contribution plans as part of their new recruitment plans. The TSP is primed to offer the logistics to such a plan. I mean if you do 18 years with the military and finally run into an arm pit that forces you to get out - you leave with nothing. There are going to be some drastic changes on the horizon all for the good of the individual.

bigbobe

04-10-2007, 10:03 AM

How does one buy into an annunity with TSP and does that bought into Met Life and what is wrong with that???

NyteTracker

04-10-2007, 10:35 AM

It's Your Money, don't give it to an Insurance Company!
The April 8th broadcast is about rip-offs, oops annuities. :worried:
http://www.manarin.com/radio_show/

Zebra

07-02-2007, 02:37 PM

Here is what the financial advisor stated during a recent FERS retirement seminar I attend, concering TSP (Met Life) Annunities - "NOT NOT NOT"! He subsequently stated, "NO WAY in Hell would he recommend giving most of your money to someone for no reason at all". As someone else previously stated, your money is gone for life.........you only get a disgraceful guaranteed monthly handout. Our Advisor went on to say "use the TSP monthly payment plan", as you have control over your account and can do basically what you are doing today with it!

I am so glad I attended the retirement seminar and I highly recommend all doing it as soon as you can schedule yourself. You will be glad.......it was worth the two days I spent. Oh by the way, we could bring our spouses which I appreciated!

07-03-2007, 06:36 AM

SkyPilot

07-03-2007, 07:54 AM

Sound advice...thank you.

Historical TSP annuity rates have exceeded 9% when "i" rates were high. Interest rates will eventually go back up, and suggest when that time comes, you may want to take another look. I sure wished to have locked in Treasury Bonds at 13%-14% back in the 1979/1980 time frame. Receiving, say 7%-9% annuity rates which are virtually risk free and not worrying about returns of the stock market returns, an extra plus, may not be such a bad idea.

Never say no...periodically review your financial circumstances and "all" financial products is always a good approach.

Ed

If the rate was 9% at the time, maybe. However, you must still surrender your principal... which I think is still way too expensive.
The total cost of the annuity could be calculated by subtracting the interest paid from the principal balance, and multiplied by life expectancy. The sum left over is what the annuity provider keeps.
As this sum is likely to be much greater than the amount paid out, it explains why insurance companies sell annuities (no matter what the rate), as the numbers are clearly in their favor. Annuities are almost always very expensive "living insurance."

budnipper1

09-04-2007, 12:46 PM

If the rate was 9% at the time, maybe. However, you must still surrender your principal... which I think is still way too expensive.
The total cost of the annuity could be calculated by subtracting the interest paid from the principal balance, and multiplied by life expectancy. The sum left over is what the annuity provider keeps.
As this sum is likely to be much greater than the amount paid out, it explains why insurance companies sell annuities (no matter what the rate), as the numbers are clearly in their favor. Annuities are almost always very expensive "living insurance."
What? Now Ben Stein is endorsing buying annuities to "safeguard" retirement?

(Text from article: How Not to Ruin Your Life) http://finance.yahoo.com/expert/article/yourlife/43552 (http://finance.yahoo.com/expert/article/yourlife/43552)

>>>>>
Annuities to the Rescue
That's where annuities come in. There are now variable annuities (VAs, which are basically pools in which your money is invested in securities and compounds free of tax) where you're guaranteed a certain monthly withdrawal amount for life -- no matter what happens in the stock market.
That is, the insurer who sells you the VA assumes the risk that the market will fall sharply. The insurer buys hedges of various kinds, and may also risk their own capital to protect your guaranteed withdrawal amounts.
(Of course, all kinds of annuities have the feature of guaranteeing payments for as long as you live or longer. But the guaranteed-withdrawal-amount VAs give you that benefit plus the possibility of substantial gains from your investments within the VA.)
Needless to say, these VAs come at a price. It's not cheap for the insurers to buy the swaps and other hedges that allow them to guarantee your payments will never fall from a prescribed amount, but that they could rise substantially instead. They pass that cost onto you to the extent that they can.
A Safe Pillow

But as we've seen in the stomach-churning weeks this summer, there's always risk in stocks. If this risk can be insured against at a price that's reasonable, it's a huge weight off the mind of the retiree or pre-retiree. So you should definitely talk to your financial planner about these new VAs. (I do not, however, recommend them for people who are significantly above age 70.)

At least think about some form of fixed annuities in your accounts when you retire. This is suitable for people of almost any age so long as there's a payment built in geared to life-expectancy tables; that way, if you die early, your heirs will continue to get payments for what would've been your full life span.
It's a comfort to be able to count on a stream of money pouring in whether you're tragically sick or startlingly healthy -- to know that no matter how the market fluctuates, you'll get a set return on at least a part of your money that will last for as long as you and your spouse do.

I love following the stock market. In the very long run it's a beautiful thing, at least in the postwar world, and I hope it doesn't turn around and bite my head off the way it did in the tech crash. But to have most investments in fluctuating stocks with a solid amount in VAs and fixed annuities represents a nice pillow on which to lay your head. "Safe" is a happy word.

Ben Stein has no financial interest in the products mentioned in this column. (???)

GarySpicuzza

04-25-2008, 01:11 PM

How does one buy into an annunity with TSP and does that bought into Met Life and what is wrong with that???

Your TSP account is a "Qualified Pension Plan" and as such it can be rolled over to any "other" "Qualified Plan" such as an IRA when you retire and or leave your job.

The investment vehicle of choice DOES NOT matter. It could be an IRA bank CD with any bank, it could be an IRA Mutual Fund with any investment firm or it could be an IRA Annuity with any insurance company.

See THIS (http://www.irs.gov/pub/irs-tege/rollover_chart.pdf) rollover chart.