By Mike Miles
November 18th, 2013 | Uncategorized
Q. I am 63 years old and will be retiring under CSRS in January. I have about $150,000 in my Thrift Savings Plan account. I have talked with a financial adviser who told me it would be better to buy from outside and cheaper than MetLife annuity. The annuity is from Prudential and has a living benefit rider. They claim it is the cheapest one out there. Can you give me any advice as to which annuity would be best?
A. Your “financial adviser” is not an adviser but a salesperson. Don’t be foolish. Now is not the time to buy a fixed annuity if you can avoid it. The payout rates are the lowest they’ve been in generations and that living benefit rider is an expensive insurance policy that is unlikely to pay off. Keep your money in your TSP account until you find someone trustworthy to advise you.
October 6th, 2013 | Uncategorized
Q. What are the MetLife annual and/or one-time fees charged after annuity is purchased?
A. The only fee is the initial cost of the annuity, which depends upon your age, the annuity you purchase and the interest rate index at the time of the purchase.
September 23rd, 2013 | Uncategorized
Q. I am retiring in the near future and I want to take my Thrift Savings Plan balance which is approximately $175,000 to $180,000 and purchase an annuity from MetLife. My concern is if MetLife were to fold. I think my state (Massachusetts) will insure me up to $100,000 in that event. I believe that is per insurance company. So would it be wise to split that total ($175,000-$180,000) and purchase an annuity from two different companies, so as not to exceed the 100,000 limit?
A. I’m not confirming your statements about the limits of protection in a particular state, but in general, dividing the purchase up among two or more guarantors will reduce the risk of default posed by a single guarantor.
July 22nd, 2013 | Uncategorized
Q. I am retiring under FERS in a few months, and am looking for recommendations on how to best invest my Thrift Savings Plan dollars. I believe my options are to buy a MetLife annuity, leave the funds in my TSP account until I turn 71 years old (I am now 60), or roll the TSP dollars into an IRA or other type of investment account. I have approximately $350,000 and will receive my FERS retirement and eventually Social Security. Do you have any recommendations to roll the dollars into an investment account that I could occasionally draw from and that could draw interest, and could you identify pitfalls relative to rolling TSP to an investment account? I know that I will be required to pay taxes on my withdrawals.
A. I recommend that you leave your money in the TSP for as long as possible. It’s the best investment environment there is. Rolling your balance into an outside investment account will burden you with higher fees, greater risk, lower expected rates of return and the loss of access to the G Fund.
July 22nd, 2013 | Uncategorized
Q. How many annuities can I purchase from MetLife with my Thrift Savings Plan funds?
A. As far as I know: One through the TSP’s program and as many as you’d like through MetLife’s retail operation.
April 29th, 2013 | Uncategorized
Q. Is an annuity purchased with Thrift Savings Plan funds from MetLife federally insured/guaranteed the way bank accounts have FDIC? Or is a MetLife guaranteed annuity not really guaranteed at all, in case even a huge company like MetLife fails?
A. A TSP annuity is guaranteed by MetLife, not by the federal government.
November 13th, 2012 | Uncategorized
Q. I will be taking the early-out offered by the Postal Service. I am a 54-year-old CSRS employee of 35 years. I have a Thrift Savings Plan account. Please give your opinion on the best option such as taking the MetLife annuity, joint with spouse, level or increasing, cash refund compared with simply leaving the money in TSP and getting monthly payments either by specific amounts or increasing by life expectancy. I don’t quite understand the difference in the two options.
A. There is no “best” choice. Using your money buy an immediate annuity guarantees income for life. You give up control of the principal and risk losing buying power to inflation in exchange for the guarantee, however. Alternately, you may retain control of the principal, manage it for your benefit and withdraw money as you need it. One of the withdrawal options available is a series of monthly payments — either as a fixed dollar amount, or a varying dollar amount that is adjusted each year, automatically, based on your life expectancy. With this method, the previous year’s ending account balance is divided by your remaining life expectancy to determine the new year’s payment amount. If you want to know more, you should read the material available at www.tsp.gov.
November 7th, 2012 | Uncategorized
Q. I have a Thrift Savings Plan account, and I have a retirement annuity with a company other than MetLife from previous employment. Can the two be merged into the MetLife program, or do I have to take my TSP account to the other annuity when I retire?
Am I correct in assuming that if I place my TSP either way, there will not be a tax penalty, since it will be put directly into an annuity?
A. Merging the two is probably not possible. You can either continue your TSP account, use the money to buy a TSP annuity from MetLife, or roll the money out and use it to buy an annuity from an outside insurance company. If you do it right, there should be no tax consequence from the rollover to an annuity purchase.
September 24th, 2012 | Uncategorized
Q. I attended a seminar given by MetLife Financial people about Roth TSP, IRAs, etc., and was told that even if I am working at 70½ and not retired that I still have to make a withdrawal of my TSP percentage. However, in the booklet “Withdrawing Your TSP Account” on Page 3 under withdrawal deadlines, it states in the second sentence: “If you are still a Federal employee employed at 70½, your required withdrawal must be by April 1 of the year following the year you separate.”
I told the lady what our TSP booklet said, but she said it doesn’t matter what our book says; that it is the IRS that says we have to start withdrawal at 70½. I am 68 now and may work past 70½ if my health holds out, and I am asking so that I know who is correct: the TSP book, or the MetLife representative?
A. Hmmm. I wonder who’s more reliable — a financial industry salesperson or the TSP? The TSP booklet is correct.
August 20th, 2012 | Uncategorized
Q. On Oct. 10, 2009, you said that you could begin receiving fixed payments and switch to an annuity. On Nov. 8, 2010, you responded to a similar question with the opposite advice. I am trying to decide whether to take payments while hoping the providers’ rates improve or go to a fixed index annuity with another company.
Is the decision to take payments in the Thrift Savings Plan irreversible?
A. My Oct. 10, 2009, answer was incorrect. You may not end a series of automatic monthly payments with a TSP/MetLife annuity purchase. That option is only available when starting the monthly payments — that is, you may use part of your account to purchase an annuity and part for monthly payments.
If you want to end your monthly payments with an annuity purchase, you’ll have to roll the remaining TSP balance into an IRA and purchase an annuity from there.
Once you begin automatic monthly payments, they can only terminated with a final, full distribution of your TSP assets.