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i am not an investor, so i am only looking for something safe over the long term. In TSP terms, that is the G fund. i understand the part about only withdrawing what i need, that makes sense.
i guess my next question is, if i stop working does TSP let me keep the money in that fund earning interest without having to buy an annuity?
this is great information. thank you. i like the idea of purchasing an additional annuity
i will have a fixed amount FERS pension as a federal employee.
i will have social security, which i won't start drawing until age 70.
i may also work until age 70, the job i have now that is feasible. i turn 65 this year.
would my FERS pension and Social Security together be enough to live on without the TSP income stream? If i can work to 70 then yes that amount is about what I am living off of now. Are there formulas for when to start drawing money out of TSP once a person stops working?
yes there is longevity in my family, mother lived until 91, dad until 89. i am in good health, exercise daily and not on any medications at all. the TSP is its own "single person annuity." where does a person buy additional annuities like the ones described above that kick in at say age 75 or 80, which would be additional monthly income? I may have a chunk of money coming in from an inheritance, which i could see going towards purchase of this type of annuity.
for TSP is it required to start drawing at age 70? and does it have to be in the form of annuity, or can it just be "as needed" withdrawals? if i stop working at age 70 does TSP amount continue to accrue interest?
thank you again for the helpful ideas and input.
This is a very informative website from an excellent annuity broker (I got most of my annuities from them:
The link takes you directly to their annuity calculator, which can tell you how much payout you can get for a particular annuity premium with various types of annuities (with or without death beneficiary, immediate or delayed, time-limited or life). Just make sure that you get fixed annuities rather than variable. With fixed annuity, you know exactly how much you get per month (yes, a fixed amount loses purchasing power with inflation, but variable annuities indexed to inflation have higher premiums and high account fees, which generally
ends up as paying out less than fixed annuities for the same premium). Even with loss of purchasing power with inflation, fixed annuity still helps due to the fact that you can't outlive it (it pays til you die), and your other pension would presumably go up with inflation. Considering your health and longevity, I think at least the longevity guarantee annuity starting to pay at 80 wouldn't be a bad idea.
I am also not an investor (I have a bit invested, just out of curiosity, but that is not the $ I need to support myself). I was self-employed for a long time, and had set up my retirement primarily based on annuities.
i am not an investor, so i am only looking for something safe over the long term. In TSP terms, that is the G fund. i understand the part about only withdrawing what i need, that makes sense.
i guess my next question is, if i stop working does TSP let me keep the money in that fund earning interest without having to buy an annuity?
YES! Absolutely. Keep it in there as long as you like. Then withdraw it after retirement any way that you like as long as you meet the minimum withdrawal requirements after age 70.5.
Yes, the G fund is the safest as far as risk of principal is concerned. It is essentially a money market type fund. The other funds will have some combination of stocks and/or bonds in them which, as you know, may go up or down in value.
i am not an investor, so i am only looking for something safe over the long term. In TSP terms, that is the G fund. i understand the part about only withdrawing what i need, that makes sense.
i guess my next question is, if i stop working does TSP let me keep the money in that fund earning interest without having to buy an annuity?
I worked for a quasi-government company that has a TSP, that gets treated like a federal TSP. I imagine things are treated the same but you should be able to find some kind of retirement guide for your plan to check the rules.
Your funds in the TSP will keep earning (or losing) value after you stop working, the same as now when you are working. You just won’t have any more income to add funds to your TSP.
One thing to look into is state taxes on funds withdrawn from the TSP.
In NY where I live, there are no state income taxes on funds withdrawn from a federal TSP (or federal pension).
If I converted those funds to my own IRA, or some other instrument, then I would lose the state income tax break.
If I were you, I’d put SOME (maybe 20 percent) of your TSP money into the L Income fund. The G Fund is really not a good place to park all your money - too conservative. The L Income fund is designed for retirees drawing down their balances. You don’t need to be a money guru - that’s what the fund managers are for.
Have you looked at TSP.gov? A lot of your questions will be answered there.
I am a Federal retiree, and looked at annuities when I retired, and didn’t think they were a good choice. Thought I could do better on my own. I am currently withdrawing about 4% of my total balance each year, and my balance is close to what it was when I retired 14 years ago. I rolled everything into a mutual fund IRA but it’s in a fund similar to the L Income Fund.
YES! Absolutely. Keep it in there as long as you like. Then withdraw it after retirement any way that you like as long as you meet the minimum withdrawal requirements after age 70.5.
Yes, the G fund is the safest as far as risk of principal is concerned. It is essentially a money market type fund. The other funds will have some combination of stocks and/or bonds in them which, as you know, may go up or down in value.
First, if any of your money is in the market, and has been, and will be there for a good while -- you are an investor.
OP, do you want to learn more about managing your own retirement money? Or you want an advisor?
Like Okey Dokie (I think), I manage my own money (what amount I have).
It may seem like a steep learning curve. But once you do your due diligence and make your selections, you really don't have to make many changes at all.
Once you know your expenses and really get a handle on how much you need to live on, then run your numbers (pension, SS, TSP) and see what you have to work with, and whether you'll have do draw down at all.
Personally, I don't do annuities. Only understand the very basics about them, and fees can be a negative.
If you do a little more learning (at your own pace, nothing has to be overwhelming), and gain som confidence, it's really not that hard.
I lean toward index funds, followed by growth funds, then balanced. Made my choices over 20 years ago haven't veered since. I'm a slow and steady as she goes person. Tortoise. Not hare.
Don't put money into anything you don't understand. If you're risk averse, that's OK (to a certain extent). Put as much in as you can and let time do its thing.
ETA: And I pray that IF you did need help, your children who seem to be doing well, wouldn't let their mother starve, or even suffer at all.
You are failing to consider the EARNINGS that your TSP investments would earn after you retire. In fact, your TSP is earning money RIGHT NOW. The amount it earns depends on which investments you choose. A conservative investment of stocks, bonds, and money market for your TSP should average at least 5% per year and more likely 7% to 8% over the long run.
This means that the $200,000 you have in the TSP should be earning you somewhere in the neighborhood of $10,000 to $16,000 per year (on average) when you retire. Therefore, if you start withdrawing $18,000 per year, your TSP account balance is decreasing at only about $2,000 to $8,000 per year, not the $18,000 per year that you stated.
Again, the money is working for you until you take it out of your TSP. Even then, it COULD continue to work for you if you invest it in private investments (stocks, mutual funds, ETF's, or bank account) instead of spending it immediately.
all things, YMMV
.
The 5%-8% annual yield assumption, while maybe reasonable for the long run, can suffer severely from withdrawals during downturns, (i.e. sequence risk) and cannot be applied to shorter stretches of time. Have you gotten such a return in the last couple of years?
I haven't.
My retirement income is however securely anchored by a pension, SS, and a single premium immediate annuity (SPIA) purchased from a TSP-like company account which affords me financial security that many desire.
(It also allows me to be more aggressive in my personal portfolio but I realize that is not pertinent to the OP.)
It is important to understand that SPIAs provide a guaranteed income for life based on an underlying interest rate assumption that insurers use, in conjunction with actuarial tables of life expectancy, to provide a monthly draw that is greater than what straight interest alone would yield.
That some live longer and others will not is the engine that pulls this train and those who ride it.
And as one who, like the OP, doesn't need to leave a legacy, it was one of the best financial choices I have ever made.
Last edited by PamelaIamela; 08-21-2023 at 06:34 PM..
The 5%-8% annual yield assumption, while maybe reasonable for the long run (and can suffer severely from withdrawals during downturns, i.e. sequence risk!) is too rosy for shorter stretches of time.
Have you gotten such a return in the last couple of years? I haven't.
C Fund: YTD 20.62%. 1 year 12.96%. 3 year 13.69%. 5 year 12.16%. 10 year 12.66%.
I’m missing something here. Why would you want the annuities to start so late in your life with no beneficiary? 80 is no spring chicken and many are done with traveling at that point in life.
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