By Mike Miles
September 21st, 2011 | Uncategorized
Q: Should I entertain the idea of purchasing a TSP annuity? Since I have been in the system, the annuity interest-rate index has tanked from well more than 4 percent to today’s rate of 2.875 percent. To me this means I would have made more per month a few years ago retiring when I had $300,000 than I can now with $560,000! Wow, big mistake. Can you advise if 1) the AIRI will bounce back? Or 2) what is my alternative if I should decide to pull the plug next July?
A: You should always be willing to consider the purchase of a guaranteed life annuity for the purpose of producing retirement income. I agree that the current interest-rate environment makes this commitment unattractive to many investors, since it will, in essence, lock in what might wind up being a low rate for life. The AIRI will rise when interest rates rise. When that will happen is anyone’s guess. Your alternative is to continue to manage your TSP assets in a way that supports your objectives.
Tags: TSP annuity