Ask The Experts: Money Matters

By Mike Miles

Annuity for the TSP

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Q. Why was MetLife chosen as the entity to provide an annuity for the TSP? Are there provisions or protections for federal employees that were negotiated? I asked that question of the TSP and they stated that there was no one within TSP or MetLife that I could talk to. Finally, most forums seem to discourage annuities — they suggest that we stay in the TSP and take monthly allotments. Comment?

A. The FRTIB chose MetLife, so they would be the ones to explain why. I don’t know of any special protections built into the deal. Once you buy the annuity, it’s between you and MetLife, and MetLife is the guarantor.

The income you are offered in exchange for your annuity purchase money varies with interest rates at the time of purchase. Once the purchase is made, the income rate is locked in for life, so buying an immediate fixed annuity is like locking in interest rates for life. Since rates are near historically low levels, now is considered an unattractive time to make the purchase. This doesn’t mean that you should not consider it as one of your options, however, since some money, guaranteed for life, is better than none if you wind up losing it.

 

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