TSP withdrawal, annuity

Q: I retired in March 2008 (civilian with DODDS under FERS). I need to take an RMD this year as I am 70.5 years old in December 2010. I received the Form TSP-70. I am a bit disappointed that the government has the option of taking an annuity on the form ( I don’t think they even mention the annuity is with MetLife Insurance) without telling you in a brochure (from MetLife, maybe) how much MetLife’s administrative fee, surrender charges, and other pertinent costs are. Is there a good non-biased site to go to to determine which is better (depending on circumstances), TSP regular monthly payments or the MetLife annuity?

A: I think you’re confusing deferred and immediate annuity contracts. The costs and charges to which you’re referring aren’t relevant to the consideration of an immediate annuity like the one offered to TSP participants by MetLife. The costs are implied in the payout rate and there is no surrender charge since there is nothing that can be surrendered. You’re simply using your money to buy (not invest in) a monthly income payment and a guarantee. The purchase of an immediate annuity is a significant and irreversible act, and I recommend that you rely on competent and thorough analysis before proceeding. If in doubt, don’t commit!

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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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