Is A $1M Annuity Affordable for You?

Could your golden years stay bright with a government-backed inflation-indexed CD of up to $1.5 million?

Most people have the kind of money it takes to buy a worthwhile guaranteed-for-life annuity. However, federal workers contributing to their Civil Service Retirement System or Federal Employees Retirement System plans are guaranteed both a lifetime income and survivor annuity.

The National Association of Retired Federal Employees says the current retirees have a median annuity of $3,171 a month for the CSRS. The amount for those under the FERS program is $1,121 a month. However, for those living in the Washington, D.C. area, the retirement benefits are much higher. They usually see annuities of $40,000.

Most retirees who have the CSRS program see full cost-of-living adjustments, while those FERS retiring employees see a not-so-great inflation rate adjustment of two percent a year.

A person who wanted a $40,000 annuity for life, they would need to pay $1.3 million. Lower-income federal workers and those retiring at 55 with the CSRS program would need to pay $1.6 million to have the $3,000+ a month.

When a person choosing a survivor annuity, the startup annuity cost is more.

If a FERS plan worker wanted to purchase the self-only annuity starting at 62 for the guaranteed $1,121 a month, they would have to pay $430,000 to do so. This does not take include the survivor annuity. That benefit is an added cost.

What can you do to get the most money from your retirement? The best thing you can do is contribute the maximum amount to your TSP plan ($18,500 or $24,500). Make sure these contributions are tax-deferred for as long as you are legally allowed and slowly withdraw the money from your TSP.

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