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TSP Annuity
Old 11-23-2006, 09:57 AM   #1
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TSP Annuity

PLEASE don't start another good vs. evil annuity argument, if you can help it!

Just saw in article that the U.S. government's TSP includes an immediate annuity option, which is interesting to me. Not for practical reasons, just curious is all. I suppose most of those eligible already have a government pension anyway.

Is it backed by the full faith of the U.S. gvnt? (If not, my curiosity just died.) Is it priced according to gender and other characteristics, like if bought in private market?

Have thought in the past that the government could be the ideal seller of annuities, as it should earn a premium for its good credit rating, and the buyer can be more secure over a long retirement. Didn't suspect that one was already offered, to some people. The problems, I thought, would be getting the gvt to price the annuity properly in an actuarial sense (or perhaps it could be a form of wealth transfer), and the Ponzi-ness of it all.

(Could have googled for answers, but thought Nords or others here would have answers in their heads immediately, and even if it's not what I thought, might make interesting discussion. So long as the old battles aren't brought back up again... )
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Re: TSP Annuity
Old 11-23-2006, 11:15 AM   #2
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Re: TSP Annuity

Not backed by full faith and credit of US govt; purchased from MetLife.

Gender neutral.

Based solely on age and $ amount.

Annuity purchased doesn't have to be all of TSP.

http://calc.tsp.gov/annuityCalculators/annuity.cfm

http://www.tsp.gov/features/chapter14.html
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Re: TSP Annuity
Old 11-24-2006, 07:51 AM   #3
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Re: TSP Annuity

Quote:
Originally Posted by Khan
Gender neutral.

Based solely on age and $ amount.
So, I guess unhealthy men are getting ripped off, and/or healthy women get a bargain.

(depending on price, both could be getting ripped off, just some more so than others.)
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Re: TSP Annuity
Old 11-24-2006, 08:12 AM   #4
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Re: TSP Annuity

Quote:
Originally Posted by lazyday
So, I guess unhealthy men are getting ripped off, and/or healthy women get a bargain.

(depending on price, both could be getting ripped off, just some more so than others.)
Is there something I am missing here about the annuity? Isn't it optional? Can't one take their money to any annuity provider one chooses? If you don't like the MetLife rules, go to an insurance company and product you do like.

Is it just me or is there an increase in people who think they are getting cheated by one thing or another because of demographics? I think your fears are as far out in la-la land as any I have seen because it involves something you don't even have to buy if you do not chose to. In actual fact, all of these retirement vehicles that offer lifetime benefits are exceedingly discriminatory to people who have poor family longevity histories. Perhaps genetics or family history should determine benefit instead of averages. Of course, smokers and carousers probably feel cheated. Perhaps they should get greater benefits over poor longevity if they have emphysema or AIDS. They need that greater income for the health costs. In fact maybe all pre-existing conditions and bad health habits should be weighted to give greater benefit the worse the prognosis. It might even make annuities more attractive to such people.
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Re: TSP Annuity
Old 11-24-2006, 09:30 AM   #5
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Re: TSP Annuity

Quote:
Originally Posted by Tadpole
Is there something I am missing here about the annuity? Isn't it optional? Can't one take their money to any annuity provider one chooses? If you don't like the MetLife rules, go to an insurance company and product you do like.
Yes, the annuity is optional. But, if you are purchasing the annuity through the TSP, MetLife is the only choice.

You could rollover your money to an IRA and buy a different annuity, though.
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Re: TSP Annuity
Old 11-24-2006, 10:19 AM   #6
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Re: TSP Annuity

Quote:
Originally Posted by kaudrey
Yes, the annuity is optional. But, if you are purchasing the annuity through the TSP, MetLife is the only choice.

You could rollover your money to an IRA and buy a different annuity, though.
The TSP Board's purpose in life is to assure the best possible return for its customers over the long term. No interest in profit. No hidden agendas (like propping up other government programs). That is why it has a minute expense ratio and why it doesn't kow-tow to Congressional whims (although Congress can and may exert its whims by passing laws directing the TSP to do something - like add a REIT fund).

For those reasons, I assume that the TSP staff carefully studied the insurance market and then let the best contract they could to provide the best assortment of SPIAs they could for their customers. It would certainly be worth investigating other options. But, if I was looking for an SPIA and thought I found a better deal, I would look very carefully before I jumped ship.
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