donheff
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The recent annuity ROI posts got me thinking about an "investment" I did not make but that a few others on this board might be eligible to consider. The Federal Civil Service Retirement System allows employees to increase their annuity through voluntary contributions. I believe FERS does as well, but I don't know what the provisions are with that. An employee can dump as much as 10% of their aggregate Federal salary into the retirement system and increase their annuity $7 per $100 contribution, i.e., 7%. (This would be reduced if electing a survivor benefit and varies with the age of the survivor.) The annuity rate increases by $.20 for each year over 55 the person is when retirement commences.
So, someone retiring from the government at 55 could purchase a fully inflation protected annuity starting at 7% with virtually zero risk of failure. By comparison, Vanguard's inflation protected SPIA would be about 4.9% for a single 55 YO male. In retrospect I think I blew this one. That sounds like a pretty good deal to me.
Also, since the government is supposed to do everything on a well supported actuarial basis, do you suppose 7% (at age 55) reflects a "fair" price before profit for an inflation protected SPIA from a cost effective provider?
So, someone retiring from the government at 55 could purchase a fully inflation protected annuity starting at 7% with virtually zero risk of failure. By comparison, Vanguard's inflation protected SPIA would be about 4.9% for a single 55 YO male. In retrospect I think I blew this one. That sounds like a pretty good deal to me.
Also, since the government is supposed to do everything on a well supported actuarial basis, do you suppose 7% (at age 55) reflects a "fair" price before profit for an inflation protected SPIA from a cost effective provider?