@@robertleejohnsonsr63 Yes. And for all who are watching this in 2021 or later, be aware that the options for withdrawing from the TSP are now much more flexible than when this video came out in 2017. All the more reason that I agree the annuity is not the best option for a FERS (Federal Employee Retirement System) retiree.
Good presentation. I won't choose an annuity. But, you let out a choose benefit of not choosing an annuity: Leaving and Inheritance. I love my kids and hope to be able to leave something behind.
Less control, more taxes. Sounds like a cash grab the insurance companies to get their hands on our TSP. They want to be the middleman between your TSP account and your payments. In they end, they profit
Make your own annuity: choose the full withdrawal option of monthly payments based on life expectancy. The TSP will then send you a monthly check from your account based on how long you are expected to live. You might get less money if you live a long time, but you will never run out. Your account remains in the market and can grow with stocks and bonds. If you die, then the remaining balance goes to your heirs, whether it's your spouse, children, or charity. An annuity charges you a lot for survivor benefits, and it can only go to your spouse. If you get the 50% option, it drops if either of you die. If your spouse dies, you lose half your payments.
This is far better than the annuity, I will agree. But why lock the payment amounts in? More control and flexibility simply to request a monthly amount that you can alter up or down as you see fit in the future. As I tell people, just because the money is coming out of TSP doesn't mean it automatically gets spent or it just vanishes. You can still save it in a separate account. Just like a paycheck now--just because you get x number of dollars doesn't mean you need to spend every dime of it. I prefer the flexible approach over the fixed payment approach. I hope people will be saving and investing a portion of every TSP check-why wouldn't they?
The real advantage to the life expenctancy is that you will never fully run out of money, as it is based and rebased on your life expectancy. The flat amount can drain your account if you are not careful.
Okay we learned about the negative side of annuities . I wish you also gave us the best options left for those who do not like to risk the stock market scenario!
One of the main problems that I have when trying to explain why a person should never take the annuity is I can’t make them understand that the annuity isn’t part of the TSP. I try to explain that you could give yourself the amount that the annuity is offering and never be in danger of running out of money. Some of them try to divide the amount that the annuity is offering into the balance while I try to explain that they are going to continue to draw returns on that money. The thing is that the returns by itself could cover most or all of the payments that the annuity is offering which means you could at a minimum still have your full principal when you die.
When you say that CSRS employee will just have their pension that is incorrect. Many CSRS annuitants do get a reduced SS benefit, in fact there are some who have full SS benefits since they have worked 30 years under SS and meet the income requirement to get full benefits.
Absolutely right. I can ask a few questions and know whether a want to recommend that advisor, or tell people to run for the hills as fast as they can!
Annuities are not the best choice perhaps , but in old age one needs a steady stream of income that is sure to flow rather than experiencing the turbulent motions of the stock market!...I hate the gambling on the few pennies I have worked for all my life!
Annuities are not a scam. It's very hard to plan to the penny the exact amount of money you need saved up to last until your very final day alive. If you plan on leaving money to heirs then don't go for annuity. But if you have no heirs, then an annuity gives you peace of mind that you won't out-live your nest egg or die before getting to enjoy it. ^_~
@@muffemod I strongly suggest you purchase an annuity. After you wade through the hidden fees and limitations, you'll realize I was right, but at that point it will be too late. At least you'll have learned a financial lesson
Just retired in December (FERS) but have not submitted form 70. The form is confusing. I am also retired Army National Guard. Do I need an annuity? Do you have a video that explains how to fill out form 70? Should I leave it in TSP or withdrawal to an IRA?
This is going to sound harsh. But, if you are sold an annuity, take the first payment you receive, go to a tattoo shop, and get the word "SUCKER" put on your forehead!!
Great video as always. One note, you can purchase an annuity with all or a portion of your Thrift account. Your video wasn't clear that you don't have to put all of your Thrift in an annuity. I'm not advocating annuities in any way just wanted to point that out. Cheers.
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What do you think about the TSP Annuity option? Let me know!
As soon as you said "the life annuity isn't paid out by the TSP board", I hear "a middleman wants to handle your TSP funds, at a cost"...
That pretty much hits the nail on the head.
I dont want to restrict myself locked into an annuity. Will I still have controll of my TSP with intra funds transfer and beneficiary allocations?
@@robertleejohnsonsr63 Yes. And for all who are watching this in 2021 or later, be aware that the options for withdrawing from the TSP are now much more flexible than when this video came out in 2017. All the more reason that I agree the annuity is not the best option for a FERS (Federal Employee Retirement System) retiree.
This is immensely helpful. I can retire in two years but will NOT choose a MetLife annuity, thanks to your advice.
You're welcome Sarah, I'm thankful to be in the position to help others!
if you are able to let me know how did you get in your position to educate others on finances? whats your story @ fed retire planning
Good presentation. I won't choose an annuity. But, you let out a choose benefit of not choosing an annuity: Leaving and Inheritance. I love my kids and hope to be able to leave something behind.
That's a good point. Thank you!
Less control, more taxes. Sounds like a cash grab the insurance companies to get their hands on our TSP. They want to be the middleman between your TSP account and your payments. In they end, they profit
That's pretty much exactly right.
Make your own annuity: choose the full withdrawal option of monthly payments based on life expectancy. The TSP will then send you a monthly check from your account based on how long you are expected to live. You might get less money if you live a long time, but you will never run out. Your account remains in the market and can grow with stocks and bonds. If you die, then the remaining balance goes to your heirs, whether it's your spouse, children, or charity. An annuity charges you a lot for survivor benefits, and it can only go to your spouse. If you get the 50% option, it drops if either of you die. If your spouse dies, you lose half your payments.
This is far better than the annuity, I will agree. But why lock the payment amounts in? More control and flexibility simply to request a monthly amount that you can alter up or down as you see fit in the future. As I tell people, just because the money is coming out of TSP doesn't mean it automatically gets spent or it just vanishes. You can still save it in a separate account. Just like a paycheck now--just because you get x number of dollars doesn't mean you need to spend every dime of it. I prefer the flexible approach over the fixed payment approach. I hope people will be saving and investing a portion of every TSP check-why wouldn't they?
Exactly, a much better option than the TSP Annuity.
The real advantage to the life expenctancy is that you will never fully run out of money, as it is based and rebased on your life expectancy. The flat amount can drain your account if you are not careful.
Thanks for confirming everything I know, and avoid, about annuities.
Very informative- glad I watched this.
Okay we learned about the negative side of annuities . I wish you also gave us the best options left for those who do not like to risk the stock market scenario!
One of the main problems that I have when trying to explain why a person should never take the annuity is I can’t make them understand that the annuity isn’t part of the TSP. I try to explain that you could give yourself the amount that the annuity is offering and never be in danger of running out of money. Some of them try to divide the amount that the annuity is offering into the balance while I try to explain that they are going to continue to draw returns on that money. The thing is that the returns by itself could cover most or all of the payments that the annuity is offering which means you could at a minimum still have your full principal when you die.
When you say that CSRS employee will just have their pension that is incorrect. Many CSRS annuitants do get a reduced SS benefit, in fact there are some who have full SS benefits since they have worked 30 years under SS and meet the income requirement to get full benefits.
Thanks for the clarification Mick!
I gave a thumbs up this was helpful.
Thank you Cooper you always have great information keep it up👍
Great video. This is one of your best.
Thank you Michael!
Annuities are scam. Discussing annuities with an advisor is a great way to evaluate their potential fiduciary responsibilities.
Absolutely right. I can ask a few questions and know whether a want to recommend that advisor, or tell people to run for the hills as fast as they can!
Annuities are not the best choice perhaps , but in old age one needs a steady stream of income that is sure to flow rather than experiencing the turbulent motions of the stock market!...I hate the gambling on the few pennies I have worked for all my life!
Annuities are not a scam. It's very hard to plan to the penny the exact amount of money you need saved up to last until your very final day alive. If you plan on leaving money to heirs then don't go for annuity. But if you have no heirs, then an annuity gives you peace of mind that you won't out-live your nest egg or die before getting to enjoy it. ^_~
@@muffemod I strongly suggest you purchase an annuity. After you wade through the hidden fees and limitations, you'll realize I was right, but at that point it will be too late. At least you'll have learned a financial lesson
@@Yette No hidden fees, and the limitations are fairly exoteric. I though you knew!
Very useful and informative thank you so much. Big help for me!!
If I opt for monthly payments and die in a couple of months. What happens to the money that’s left. Can I leave to my children.
The TSP annuity interest rate in 2020 is just 1.75%. At that interest rate, it would take 57 years of payments just to recoup your initial investment.
Great information to know. Thank you so much!
Just retired in December (FERS) but have not submitted form 70. The form is confusing. I am also retired Army National Guard. Do I need an annuity? Do you have a video that explains how to fill out form 70? Should I leave it in TSP or withdrawal to an IRA?
whats your age and your goals may be a good place to start when talking to an advisor
Great video... thanks cooper!
You're welcome Debbie!
This is going to sound harsh. But, if you are sold an annuity, take the first payment you receive, go to a tattoo shop, and get the word "SUCKER" put on your forehead!!
luna so what do you suggest
really good very informative video here → no chance i’m getting involved with a metlife annuity…
Great video as always. One note, you can purchase an annuity with all or a portion of your Thrift account. Your video wasn't clear that you don't have to put all of your Thrift in an annuity. I'm not advocating annuities in any way just wanted to point that out. Cheers.
That's a great piece of information I should have clarified. Thank you!
What happens if you choose the annuity with MetLife and you die shortly after with the balance.
What is a fur and sur?
FERS and CSRS
Life Annuity doesnt go with me, it just doesnt make any sense at all. I dont even why they created this, for me is a scheme.
How about the Life cycle funds?
I should do a video on that!
Thank you
It is Single Life Annuity and over when you die!
+1
The problem it that social security is going to be ending soon. It's very unlikely it will be here 40 years from now
It's very unlikely most of us retirees or soon to be retirees will be here in 40 years either
America will end before Social Security will.
Annuities are for suckers!!