By Mike Miles
May 23rd, 2012 | Uncategorized
Q. What would be the advantage or disadvantage to a retiree of transferring their TSP to a variable and/or fixed annuity? What are the issues to look for, if any?
A. The main disadvantage of variable and deferred annuities is their high cost. The main disadvantage of a fixed immediate annuity, in the current environment, is a low payout rate. I don’t know a universal advantage to a variable or deferred annuity. The advantage of an immediate fixed annuity is guaranteed income for life.
March 13th, 2012 | Uncategorized
Q. Why are variable annuities such a bad retirement option? I have seen this stated many times, but I’m still not sure why this is the case. On the other hand, I’ve almost never seen any investment outperform the TSP stock funds on a long term basis. I have rebuffed the efforts of my financial adviser (and many other advisers during lectures) to get me to roll over the TSP to “more flexible” IRA options.
A. Because they are expensive. Keep your money in the TSP. Your financial adviser is a salesperson who wants the big fat commissions you’ll pay through the annuity. Find a real financial adviser or go it alone. You’ll be better off.
March 9th, 2012 | Uncategorized
Q. I’m recently retired from the federal government. I have currently made no changes to my TSP, leaving everything in my account. Is it generally a good idea to leave your funds in the TSP or should I consider rolling it over to an IRA?
Also, what is your opinion of a variable annuity?
A. It is generally better to leave your money in the TSP as long as possible. It is the best retirement investment environment there is. In my experience, variable annuities are one of the WORST investment propositions you’ll find. Avoid them unless a trustworthy (competent and free of conflict of interest) analysis proves otherwise — something I have yet to see happen.