Ask The Experts: Money Matters

By Mike Miles

Social Security, special retirement supplement and TSP

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Q. I am a Postal Service employee under FERS. I am going to retire soon with 26½ years at age 60. Do I have to take the special retirement supplement, or can I waive it? If I take it, do I have to start taking Social Security at 62, or do I have an option to wait until I am older? If I decide to purchase an annuity with my Thrift Savings Plan balance from MetLife, is that annuity protected if MetLife folds?

A. Mike: A MetLife annuity is backed by MetLife. Your state may also offer some backstop in the case of MetLife’s failure. It’s not guaranteed by the federal government, if that’s what you’re asking.

Reg: There is no conceivable reason for turning down the special retirement supplement. You don’t have to apply for a Social Security benefit when you turn 62, you can delay that decision as long as you want.

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MetLife annuity and RMD

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Q. I am 70½ years old and about to retire under CSRS. If I use my Thrift Savings Plan account to purchase a MetLife annuity, how are the required minimum distributions handled?

A. Life annuity payments satisfy the RMD for the amount of money used to buy the annuity.

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The problem with annuities

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Q: In a recent response, you recommended a reader not take out an annuity using Thrift Savings Plan funds. Do you consider these annuities unsafe? I am thinking of taking an annuity when I retire to guarantee an income (along with my regular annuity and Social Security). I’m not sure that I would get enough through taking a set amount each month, or that it would last for the rest of my life. What do you see as the problems with the MetLife annuity? Are there fees for administering the account?

A: Because it is an irreversible action, I generally recommend that you purchase an annuity only when it is clearly your best option. MetLife is a large and reputable company. My concern is that you might be locking in an income stream that will not keep pace with inflation and which provides no flexibility to accommodate changes in your needs. These are the risks you accept in exchange for the annuity’s guarantee.

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