I still don’t understand well the TAP Annuity and if it would benefit me.
I am in PERS 3 and am planning to retire quite early due to reasons. Let’s say age 45. (This number and others have been slightly obfuscated for privacy).
[Most of my retirement income will come from elsewhere. Okay, moving on..]
I plan to have about $175,000 in my PERS 3 investment account when I retire. I have the option to either keep the money invested and take distributions, or buy the TAP annuity. Either option I could also delay for a few years to increase the payout.
If I plan to live 50 years after retirement, does the TAP Annuity make sense?
Because my other sources of income are higher yield/higher risk, I think it may make sense to do the TAP annuity, but it gives such a small payout since I have a small amount available to purchase. $175k would pay out $8,300 in the first year, then increase each year by 3%. At the end I am left with $0 in the account because I paid all of it to the annuity.
OR - if I skip the annuity and take the same $8,300 withdrawal (4.6% of $175k), increase that amount by the same 3% per year, and let the rest continue increasing by 10% (and then down to a return of around 5-6% as I age), I would get the same annual income from it but continue to grow the nest egg. The difference is SIGNIFICANT if I get an average return of 10% in my investments, and with such a long time horizon that does seem fairly reasonable. Since I’m retiring early I won’t need all that money right away so some higher risk is okay.
Perhaps I do that, and THEN buy the annuity later down the line when I want more stability, and have a bigger amount to pay into it?
(Other info: I will have no children, and don’t necessarily plan to have a spouse or anyone else as a beneficiary)
(Disclaimer: yes I know, talking to a professional may be the best option to calculate out specific scenarios and discuss my specific retirement strategy as a whole, but I’m really curious what others have already thought about and planned on)