Anybody here have an annuity? Are you glad you purchased one or regret it? Right now, interest rates are at or around 6%. If interest rates climb to closer to 7 then it may be a good time to lock in an annuity. I've always heard the negatives for annuities but when the rates were at 2 percent then buying an annuity would have been ill advised. Thoughts? And don't just say they are stupid. Explain why they are stupid.
annuities
- Thread starter ibd1
- Start date
I just moved some $$$ into an annuity, its guaranteed approx 6% return. Its based on the results of a mixture of stocks. If the return of the stocks are 10%, you get 6 %, if the return is 2%, you get 6%. No fees. Its for 3 years but, Its possible to take it out before, but, I will keep it there. I have heard a lot of negatives about annuities.
GarbageLLV
Well-known member
Annuities are not great if you want to reap the rewards of the stock market. Annuities are great if you want a flat rate.
Doing an Annuity, you have no chance of growing your funds.
Doing an Annuity, you have no chance of growing your funds.
How is a guaranteed rate of return with no fees “no chance of growing funds” ? Btw, all of our funds are NOT in annuities.
GarbageLLV
Well-known member
OK. I misspoke. I meant that if you put all of your TSP into an annuity, you will only get a 6% return on your investment. If you keep your TSP active and withdraw from that, your TSP will continue to grow. And it can do much better than a flat rate of 6%. Also, I believe you have to pay into an annuity.
They are probably more attractive if you are 70+. The markets generally perform better than annuities over 10 year span.
I didnt put any TSP money into the annuity. I do not withdraw any money from my TSP. I do not pay anything into this annuity besides what I just put in. I can transfer the money from the annuity whenever I want.
Its in my spouses & my name, no kids. I need to look into if something happens to both of us
.
RammerJammer
Well-known member
I think that’s only when take your whole tsp balance and buy a lifetime annuity for fixed monthly payments. You get the monthly payments until you die but if you assume room temperature tomorrow they don’t owe your survivors nothing. Most fixed annuities I’ve seen are like a cd but the difference is you don’t have to pay taxes until you withdraw. And they allow you to withdraw 10% of the principle after each year but charge a penalty if more than that and to get the highest rate requires locking in for 7 yrs.
justacarrier
Well-known member
It all depends on what you buy and pay for when you purchase the annuity. You pay extra, as in receiving a lower monthly payment, for any options you wish for survivor benefits. I do think most allow for a few different options for what happens to your funds on death. Can be quite expensive though.
RammerJammer
Well-known member
When something sounds too good to be true I usually ignore it like these popups on FB all the time offering annuities above 12%. A couple are one that has to do with Phoenix Energy and another in Texas called FISYN which says they’ll even pay the surrender charges to get you out of your current annuity. Anybody heard of these before or know how legitimate they are?
RammerJammer
Well-known member
Another thing I came across on FEBA site where they want to show you tsp maximization. They recommend rolling over your tsp into a private ira set up by them and they claim to offer one with a 10% cash match/bonus whatever that means.
My financial advisor was telling me a few weeks ago that you can call human resources & ask for your cash postal annuity amount before you retire(can't get 1 pension check) & you can cash it out. Then roll it in to a 401K & that the investment will bring you more $$ than what the post office gives you over time. I mentioned it @ work & another rural (same age) said he was looking in to it also. Over time the markets will make more of an increase than what yo would get for the retiree COLA. pondering.....
RammerJammer
Well-known member
If it’s on the interweb, it has to true right?Any investment that advertises a 12% return sounds very shady to me. If it was legit they would be flooded with. Where do I sign up
!
DB.Cooper
Well-known member
I get that phoenix energy popup all the time... hard to imagine getting 12 or 13% without some sort of catch...
DB.Cooper
Well-known member
I guess my question on ROI for retirement is... How much is enuf? If you can generate (pick a number)... Say $80K in risk free investments, is that enuf, or should you take some risk in hopes of higher returns???? Also, if you're hauling in (pick your number) $80k or $90k in additional income from pensions and SS, is that enuf???? Or should you spend your retirement day trading???? 
Voglio-il mio
Well-known member
You need to better explain this? Doing this could result in losing tax advantages, placing your income in a higher tax bracket for that year, as well as 30% in penalties!
If you take a cash annuity payoff before you retire you will be most likely be paying a penalty, also that sum of money will be taxed as income for the year it was dispersed. So if you have already paid taxes when you receive you lose that advantage to contributing to a 401K. So instead you should fund a ROTH IRA with that money.
Pre-Retirement Pension Payout Options
In many cases, it is possible to receive a cash pension payout before full retirement, though eligibility depends on your specific plan's rules, your employment status, and your age. While most traditional pensions are designed to provide monthly income at age 65, several scenarios allow for earlier access.
Common Scenarios for Early Payouts
- Leaving a Job: If you terminate employment before reaching retirement age, some plans allow you to take your vested benefits as a one-time lump-sum payout rather than waiting for future monthly payments.
- Company Buyout Offers: Employers may sometimes offer "lump-sum windows" to vested former employees. This allows the company to buy out its future pension obligations in exchange for a large payment today.
- Small Balance "Cash-Outs": If your accrued benefit is below a certain dollar threshold (e.g., $7,000), a company may automatically pay out the balance as a lump sum to reduce administrative costs.
- Hardship or Disability: Early access may be granted if you become permanently disabled or are diagnosed with a terminal illness.
Financial Consequences of Early Withdrawal
Taking a cash payout before age 59½ often carries significant financial penalties:
- 10% IRS Penalty: Distributions taken before age 59½ are generally subject to an additional 10% early withdrawal tax penalty.
- Mandatory Tax Withholding: Employers are often required to withhold 20% of the payout for federal income taxes if the money is paid directly to you.
- Loss of Future Income: Cashing out eliminates the guarantee of a lifelong monthly income stream.
justacarrier
Well-known member
If you have reached the point of being eligible for retirement, to take the "lump amount" vs collecting a retirement is a no brainer. You would NEVER forgo you retirement for the lump sum, you would never have time for it to gain anywhere near what you would receive in retirement annuity. Now if they are talking about someone quitting with only 5 to 10 years of service and still very young this may be a different story. But it didn't seem that that was what you were talking about.
