Browsing: annuity

Q. I plan on making the full survivor (50 percent) annuity reduction at retirement. I understand the cost is 10 percent, but I have received different answers as to the ongoing cost. One expert said the cost is calculated at 10 percent at the time of retirement. The other expert said the 10 percent cost also grows with each annual COLA so that the ongoing cost is always 10 percent of the then-current annuity payment after COLA. Which is correct?

Q. I am a FERS retiree and following your advice, I have not touched my TSP. This year I must start Required Minimum Distributions and am thinking of having TSP buy an annuity. The news says “the Fed” may raise rates soon. Will that raise the TSP annuity interest rate?

Q. Your April 2 column contains an answer to a fellow who mentions “The state I live in only insures annuities up to $250,000 and I’d like the remainder of my TSP balance to be insured by purchasing a second annuity from a different provider.” Do some/all states insure annuities? That’s significant to me: I’d been anxious about purchasing a lifetime annuity from MetLife upon retirement since Tammy Flanagan mentioned that the annuity is not at all guaranteed, so that if MetLife goes bankrupt the annuity could be lost. Can you provide an answer, perhaps in a future column?

Q. Will TSP allow me to purchase one annuity from MetLife and a second annuity from a different provider?  The state I live in only insures annuities up to $250,000 and I’d like the remainder of my TSP balance to be insured by purchasing a second annuity from a different provider.  Are there any strategies I could employ to accomplish my goal of insuring the entire TSP balance that I’d like to use to purchase these annuities? 

Q. What sources of income are considered in calculating the substantial income that is defined for purposes of reducing the Windfall Elimination Provision? W-2 wages? Self-employment wages reported on a 941? Contract wages reported on a 1099? State teacher retirement pension? One time lump-sum supplemental pension amounts? A. Any earnings which were subject to Social Security taxes count. Check your Social Security statement for a history of these earnings.

Q. When must I begin making my required minimum distribution? Since I turn 70-1/2 late in the month of April, I’m not sure about the requirement. A. If you’re separated from federal service, your first distribution, for tax year 2015, will be due by April 1, 2016. If you’re still working, then it won’t be due until after you retire.

Q. If I separate from government service after 10 years at age 35, can I withdraw a chunk of my TSP and ask for annuity payments of 10 years or more to avoid the withdrawal penalties? A. In order to withdraw without penalty, you must meet one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

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