TSP Annuity option

General TSP Discussion.

Moderator: Aitrus

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

TSP Annuity option

Post by ProduceMan »

How does the annuity option work
Moneys’ Money Making Money (4M)

User avatar
ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Annuity option

Post by ArrieS »

ProduceMan wrote:How does the annuity option work
Poorly.







P.S. Sorry, I couldn't help myself.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

floridabre
Posts: 24
Joined: Thu Sep 11, 2014 7:48 am

Re: TSP Annuity option

Post by floridabre »

ProduceMan wrote:How does the annuity option work
in exchange for you turning over some amount of your TSP balance, you are rewarded with a minimal (defined by the options you choose) annual payment.

check TSP.gov for details - you also may want to ask the question there to get alternatives.

https://www.tsp.gov/PlanParticipation/L ... tions.html

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

Re: TSP Annuity option

Post by ProduceMan »

How much would a 500 annuity cost
Moneys’ Money Making Money (4M)

User avatar
ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Annuity option

Post by ArrieS »

ProduceMan wrote:How much would a 500 annuity cost
What you get an Annuity for largely depends on what the current interest rate is. Since many annuities invest in safe assets like bonds, the current interest rate on bonds determines the cost of the annuity.

The best time to buy an annuity are when interest rates are high/higher because you can get a larger annuity for the same amount. Of course, that's a typical annuity, there are hundreds of variations.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

Re: TSP Annuity option

Post by ProduceMan »

ArrieS, can you give me a rough cost estimate of a 500 annuity based from last week with 200,000 TSP account
Moneys’ Money Making Money (4M)

floridabre
Posts: 24
Joined: Thu Sep 11, 2014 7:48 am

Re: TSP Annuity option

Post by floridabre »

ProduceMan wrote:ArrieS, can you give me a rough cost estimate of a 500 annuity based from last week with 200,000 TSP account
on the TSP web site i posted earlier you can find the base interest rates by month that TSP has used (my recollection is April 2018 was 2.875%!). the least you would have to have to pay 500 per month would be calculated as X * .02875 / 12 = 500/month, X = 208695.70, this is a minimum as when you start adding "features" the annuity "costs" more, things like survivor benefit, escalating payment, etc. - its all right there on the TSP site

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

Re: TSP Annuity option

Post by ProduceMan »

Floridabre, thanks for the info. Seems like ArrieS hit it on the nose. Better to manage it myself.
Moneys’ Money Making Money (4M)

rcevans
Posts: 19
Joined: Mon Apr 22, 2013 7:00 am

Re: TSP Annuity option

Post by rcevans »

200K on life expectancy will probably get you the $500/ mo or more you want. Plus your amount will probably continue to grow and be at your finger tips if needed. There is a page on the TSP website to figure your life expectancy payments, hard to find but if you call them they will get you there to figure it out. Pretty much the same as a 72t plan

ProduceMan
Posts: 573
Joined: Thu Jan 18, 2018 12:01 pm

Re: TSP Annuity option

Post by ProduceMan »

I thought if you purchased an annuity then the money is gone, but if you leave money in TSP and take life expectancy withdrawals then it will continue to react with the market. Please correct me if I’m wrong.
Moneys’ Money Making Money (4M)

User avatar
ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Annuity option

Post by ArrieS »

ProduceMan wrote:I thought if you purchased an annuity then the money is gone, but if you leave money in TSP and take life expectancy withdrawals then it will continue to react with the market. Please correct me if I’m wrong.
I don't know any specifics about the annuities you get with the TSP. But, in general all annuities have a surrender period. But there are penalties and fees can can add up. I think most are more than 10% when everything gets added in.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

mindofmush
Posts: 353
Joined: Mon Jul 02, 2012 1:38 pm

Re: TSP Annuity option

Post by mindofmush »

ProduceMan wrote:I thought if you purchased an annuity then the money is gone, but if you leave money in TSP and take life expectancy withdrawals then it will continue to react with the market. Please correct me if I’m wrong.
Yes, you are correct that if you purchase an annuity that you have spent your money and it is gone.

The life expectancy withdrawal rate takes smaller withdrawals early to allow capital to build up which allows larger withdrawals later (to make up for inflation). Usually only required for early retirements with no other alternatives.

If you don't want your TSP account to react to the market, choose the G fund. (No risk and no growth.)
mo meng, mo ching (which loosely means: no money, no life)

Smoker317
Posts: 13
Joined: Mon Dec 11, 2017 11:10 am

Re: TSP Annuity option

Post by Smoker317 »

Please correct me if I am wrong, the way I understand the TSP annuity to work is if one buys the annuity with no spousal survival option and the TSP annuity person drops dead from a heart attack or is stung to death by killer bees, well that money is gone. Met Life thanks you for taking an early dirt nap. The other example given to me was if on my first day of retirement with spousal option, I walk to the mailbox and am killed by a truck, then yes my wife will get the survivor amount, but then in her grief of my passage, she is not paying attention and is struck and killed by a truck while retrieving the mail the next day, well, Met Life thanks her for early departure and keeps the money. I was told one is truly buying an annuity and that is not passed on to children, grandchildren, etc.

If one keeps the TSP balance and take periodic draws, the balance of that account is still distributed according to the beneficiary form on file. So I tomorrow, the wife gets the balance of the account to do with what she wants. We both die tomorrow, then my balance goes to my estate and the executor of my estate will distribute funds according to the terms of our wills to the children, etc. (certain life achievements, milestones and/or time has to occur to before the kids get the full portion of their designated amount.)

If the children make poor life decisions, the executor is instructed to give the million plus in insurance money and TSP to an organization dedicated to the preservation of the roughly seventeen endangered worm species around the globe. LOL. The last thing some young 20 somethings need is 3/4 of a million inheritance thrown into their checking account. As much as I have tried to teach them, I am concerned they would still blow the money or be taken advantage of... Oh well, all one can do is try, one thing is for sure, I won't be worrying about it after death. LOL

Regularguy
Posts: 191
Joined: Tue Sep 24, 2013 11:39 am

Re: TSP Annuity option

Post by Regularguy »

Appling the 4% rule but only using 3% on 200K would be 500 a month just withdrawing it yourself rather than paying someone else to mail you a check.. and presuming the market will average about 8% a year and at least 3% then in theory you would always have a 200K balance. Maybe even grow the 200 K higher. Just Living off the interest. What do You think?

User avatar
evilanne
Posts: 2067
Joined: Thu May 14, 2015 6:52 pm

Re: TSP Annuity option

Post by evilanne »

Try this https://www.tsp.gov/PlanningTools/Calcu ... dentAge=23 Update to fit your situation. There are separate tabs you can look at to compare with annuities.

Post Reply

Fund Prices2024-03-28

FundPriceDayYTD
G $18.15 0.05% 1.05%
F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
S $82.43 0.30% 6.92%
I $42.57 -0.24% 5.95%
L2065 $16.38 0.02% 8.37%
L2060 $16.39 0.02% 8.38%
L2055 $16.39 0.02% 8.38%
L2050 $32.73 0.01% 6.95%
L2045 $14.91 0.02% 6.58%
L2040 $54.38 0.02% 6.22%
L2035 $14.34 0.02% 5.79%
L2030 $47.67 0.02% 5.38%
L2025 $13.15 0.03% 3.43%
Linc $25.61 0.03% 2.82%

Live Charts

Pending Allocations

Under development. For now, you may view Pending Allocations by going to "fantasy TSP" and selecting "Leaderboard sort" of "Pending Allocations".