New York's public-sector workers are accruing two guaranteed retirement income streams. One comes from the retirement system to which the worker belongs while the other one comes from the Social Security Administration.

Both income streams are adjusted for inflation, with the Social Security Administration being, by far, the more- generous one. Additionally, workers can choose between two fabulous investment-savings plans if they truly want peace of mind in retirement.

The New York State Deferred Compensation 457(b) Plan is for state and local workers, including those of school districts. The Deferred Compensation 457(b) and 401(k) Plans of the City of New York are for city workers, including those with the Department of Education and NYC Health+Hospitals.

That being said, too many workers are investing in expensive private annuity contracts. These contracts are issued by insurance companies because of their income guarantee.

Is a third guaranteed income stream a fair deal? Let's say Robert, age 65, wants a third income stream and uses his Deferred Comp balance of $300,000 to purchase it. His friendly MetLife agent quotes him a monthly income of $1,560. This income is quite inferior to the New York City Employees' Retirement System, which guarantees a monthly income of $2,664. Now you know just how expensive these private annuity contracts are. If you have one of these contracts or are contemplating purchasing one, please contact me.

Should Robert go ahead with the purchase of an annuity contract, he needs to know that he is, irrevocably, transferring his ownership of $300,000 to MetLife. He also needs to know that the monthly income of $1,560 is not only inferior but will be ravaged by inflation due to the lack of a cost-of-living adjustment. In short, do not purchase a private annuity contract.

Let's assume Annie has a Deferred Comp balance of $300,000 and retires at age 65. She claims her two retirement allowances but wants a third stream of reliable income without resorting to an annuity contract. I would suggest Annie invest her $300,000 in a balanced, no-load, mutual fund consisting of 65 percent stocks and 35 percent bonds.

Having said that, the NYCERS uses an annuity factor, at age 65, of 0.10654. Annie is conservative so she decides to use an annuity factor of 0.09654. $300,000 X 0.09654 = $28,962 per year. But Annie wants a monthly income, so she divides $28,962 by 12 to arrive at a monthly income of $2,413. While the monthly income of $2,413 is not guaranteed for life; it does do the trick. Annie's triple play is complete without signing over her ownership of $300,000 to MetLife.

As always, I welcome your questions.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at

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