Commission-based annuity sales people (the sharks) are feverishly soliciting all of us in an attempt to sell us an annuity contract.

Just what is an annuity? It’s a contractual obligation of an insurance company to pay the purchaser of the annuity contract, the annuitant, a guaranteed monthly income during the lifetime of the annuitant.

Example: In return for a premium of $100,000, the Metropolitan Life Insurance Company will guarantee a 65-year-old a lifetime income of $6,240 per year, or $520 per month. You will receive roughly the same quote from all life-insurance companies.

How do we know if this is a good deal? Read on.

It’s unfortunate that of the eight public-sector retirement systems in this state, only the Teachers’ Retirement System of the City of New York had the foresight to administer two retirement plans: a pension plan and a voluntary, supplemental retirement savings plan (i.e.; 403(b)/457(b)/401(k)).

A NYCTRS retiree may purchase a supplemental annuity from the TRS with all or part of his or her TRS 403(b) balance. Using $100,000 as the annuitized principal, a 65-year-old annuitant would receive $9,728 per year or $811 per month.

It stands to reason that if the other seven public-sector retirement systems of this state administered their own supplemental retirement savings plan, their members would also have the option of annuitizing all or a portion of their supplemental savings with the retirement system to which they belong.

Other than participants in the NYCTRS 403(b) plan, the public pensioners of this state must resort to annuitizing, at their option, all or a portion of their supplemental retirement savings with a commercial life insurance company at guaranteed income rates that are 64% of the income rates guaranteed by the Teachers’ Retirement System of the City of New York ($6,240 divided by $9,728 = 64%). This is a bad, bad, deal and must be avoided.

Avoidance is hardly enough. The opportunity to annuitize all or a portion of one’s supplemental retirement savings being extended only to participants in the TRS 403(b) plan represents a severe blemish on those unions that purport to fight for the retirement income security of their dues paying members.

Parity demands that all public sector pensioners have the right, at their option, to annuitize all or a portion of their supplemental savings with the pension system that guarantees their pensions.

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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