Converting a 401K type plan into an annuity at retirement
I recently took an early retirement from the Federal government which allows me to receive my pension immdiately. As I am not yet 62 I am not able to take social security and hope to wait until at least 65 to do so. A third part of the government retirement package is the Thrift Savings Plan (TSP) which is like a 401K plan to which I have contributed over my 27 years of service. Since I am retired I am able to either leave my money invested in the TSP and allocate funds to various options such as a stock fund, a bond fund, or government bonds, or I can covert my current TSP balance to an annuity that will pay me equal monthly payments until death. The payment will be based on my current balance and come with a 2% yearly increase. There is also a survivor benefit should I pass before my spouse. WIth current market volitility would it be safer to convert to the annuity and lifetime payments or stick with investing in the market. Presently the majority of my money is in medium risk investments. I am not in need of the TSP money now as my pension and my spouse’s goverment pension from a local entity support our current needs. Our home is paid for and we have over a year’s worth of expenses in liquid savings in the bank. Thanks so much for your time.
Terry Says
OK, this is a BIG question — and deserves thorough study before making this decision. I suggest some meetings with a fee-only FIDUCIARY financial advisor who can model this out for you. Please click on this link and watch the video. You’ll be matched by Pam with someone you can trust to review your entire situation around retirement income.
https://www.terrysavage.com/pam-krueger-wealthramp/
And, I’d just like to add one thought: You should wait until AT LEAST your full retirement age (67) before taking SS. And wait until age 70 to get your maximum benefit if possible, based on your other income. That’s one of the reasons you need an overall review. Your basic assumption of starting SS at 65 and taking a permanently reduced benefit is definitely a terrible one.
