Indexed annuity


Q. I just heard a presentation on a Nationwide indexed annuity and was impressed by the historical returns, insurance company, no annual loss guaranty and right of survivorship. How might I decide if an indexed annuity is the right choice for some of my TSP funds? How might I fund an external annuity with TSP funds? I’m a 63-year-old enrolled in FERS with nearly 30 years of federal service, and I am looking forward to retiring in the next couple of years.

A. These financial products are complex and often aren’t what they seem. You should start by reading carefully every word of the contract, the prospectus and any related documentation that describes the terms and costs of the contract. Once you clearly understand all of the provisions that will apply in the various circumstances you may encounter, you should conduct a thorough and unbiased analysis of probabilities that the contract will be worth what you will pay to own it.

The presentation you heard was a sales pitch that was carefully designed to make it sound as good as possible. You’ll notice that there are disclaimers that warn you that nothing in the sales pitch is binding. It’s the terms of the contract, the insurer’s business policies and. ultimately, a judge, that will decide what happens.

You certainly should not enter into such an expensive agreement without clearly understanding what you are getting into. How much will you pay in sales commissions for the purchase? How much will the contract cost on an ongoing basis? Is the insurance you are buying worth the cost? How do you know? If you can’t answer questions like this, you should not even consider buying an equity indexed deferred annuity contract.


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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 and view his blog at

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