Regardless of the amount of annuity income generated, I am steadfastly opposed to the purchase of an annuity with one's supplemental retirement investments: (457(b), 401(k), 403(b), 401(a), IRA).

With that said, the Teachers' Retirement System of the City of New York and the Board of Education Retirement System of the City of New York (TRS/BERS) are the only two of the state's eight public-sector defined benefit pension systems to also offer voluntary defined-contribution investment plans. TRS/BERS offer their retirees the opportunity to annuitize up to 100 percent of their 403(b) balances using the same favorable annuity income rates applicable to the TRS/BERS defined benefit pension systems.

Example: Bill, age 65, annuitizes $500,000 of his 403(b) balance. Bill will receive $48,640 per year for the remainder of his life. If Bill was a member of any one of the other six defined-benefit pension systems, he would have had to purchase his annuity from a private insurer like the Metropolitan Life Insurance Company, which would guarantee him no more than $31,200 annually for the remainder of his life.

Q.: Why are the retirees of the TRS/BERS the only group of public-sector retirees in this state that are granted the opportunity to convert their supplemental retirement savings to lifetime annuity income while the majority of public-sector retirees must accept far less annuitized income from a private life- insurance company?

TRS/BERS 403(b) investors should not take this information to mean that I endorse annuitizing TRS/BERS 403(b) balances. I don't. Why? Because Bill has irrevocably transferred his title to his $500,000 to the TRS/BERS. In return, TRS/BERS will pay him $48,640 per year for the remainder of his life. Bill no longer has access to the $500,000 because Bill no longer owns the $500,000; TRS/BERS does. Moreover, Bill is the recipient of two mandatory, lifetime annuities: his TRS/BERS pension and his annuity from the Social Security Administration. Annuitizing, voluntarily, his supplemental retirement capital is too much of a good thing. Two lifetime annuities are just what the doctor ordered; a third isn't warranted.

Reminder: Conversion of pre-tax retirement savings to Roth IRAs is for keeps. You may no longer return the amount to pre-tax status. Contact me should you need clarification.

Those retirees who wish to annuitize all or a portion of their savings must accept far less retirement income. Bill is a retired cop from Utica, New York. He has a $400,000 balance in his deferred-comp account managed by the Deferred Compensation 457(b) Plan of the State of New York. Assume he leaves half with the Plan and annuitizes half with the Metropolitan Life Insurance Company. He will get $12,480 per year for the balance of his life.

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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