While there are a variety of annuities available in the market, one particular type, the Single Premium Immediate Annuity (SPIA), is a recognized tool for longevity protection – that is, converting a lump sum of money to a fixed stream of income that pays out for the annuity holder’s lifetime (or when chosen as a joint annuity, pays out as long as either spouse lives).

A SPIA may be offered by an insurance company or by a retirement plan. FCMM operates a SPIA, which we call our Monthly Income Benefit (MIB). The FCMM MIB has no conversion fee, sales charge, or other costs. Operated using sound actuarial data and financial reviews, the MIB carries the additional advantage for ministers for the monthly payouts to be designated by FCMM as housing allowance eligible.

Advantages of the MIB include:

• Predictable payments, similar to traditional pensions, of a certain amount per month.
• No risk of outliving payments.

Perceived disadvantages include:

• Conversion of the lump sum to an annuity means that such amount is owned by the annuity pool for the benefit of all annuitants and is no longer owned by the annuitant. Instead of an asset balance, the annuitant has a dependable income stream.
• The amount converted to an annuity, thus, is not inheritable regardless of longevity.

As with all other aspects of retirement planning, the person makes a balancing decision, weighing the risk of running out of money (and becoming a financial burden to family and potential heirs) with a desire to manage the funds and potentially provide inheritable funds to those heirs.

However, a decision to annuitize need not be “all or nothing” or even immediate upon starting distributions. Any portion of one’s FCMM retirement funds can be converted to the MIB annuity, and the decision to do so can be made at any time.

For the former decision (how much to annuitize), it can beneficial to not annuitize all but to retain a portion of the accumulated retirement funds for unexpected use or for eventual distribution to beneficiaries. When living expenses are covered by the MIB (not inflation adjusted) plus Social Security (inflation adjusted), a remaining portion can be invested for potentially higher returns and possibly inflation protection. This can be described as baseline annuitizing – converting enough of retirement funds to an annuity to ensure that one’s monthly income does not fall below the level needed.

As to timing, there is no age threshold for annuitizing. One might continue to manage their retirement funds and then convert some or all to an annuity as they experience reduced capacity to actively manage. This is sometimes described as an annuity backup plan.

Available Monthly Income Benefit (Annuity) Options for In-Plan Conversion

When you wish to consider converting all or some of your FCMM retirement account assets to a Monthly Income Benefit, FCMM will estimate specific income results upon request. The calculations for monthly payment incorporate: the value in the participant’s account, the age of the participant, the age of the participant’s spouse when applicable, current actuarial tables, the interest rate adopted by the FCMM Board of Trustees, the assumed life expectancy according to longevity studies, and the type of benefit selected. These factors determine an actuarially sound amount based on long-term investment performance. 

Choices available include:

Single Life: Payments continue only as long as you live. Upon death there is no estate residue.

Single Life Five Year Certain: Payments continue as long as you live. If death occurs prior to having lived the full five years of retirement, payments would continue to your beneficiary for the balance of the months from your death to the end of the five-year period and would provide no payments beyond the five years.

Single Life Ten Year Certain: The same as the Five Year option except the limiting factor is ten years instead of five.

Joint and 2/3: Payments continue for as long as you and your spouse live. Upon the death of either one of you the payments continue but at the reduced rate of 2/3's of the original amount.

Joint and Full: Payments continue at the original amount for as long as either of you lives.

If you’re within three years of drawing retirement distributions, you can request MIB estimates by calling FCMM Client Services at (800) 995-5357 or emailing fcmm@fcmmbenefits.org.

For overall planning purposes, you can estimate the income amount per $100,000 converted will be: 

• $519/month for a couple, both age 67, choosing Joint and Full.
• $617/month for single life at age 67. (With 5-year certain: $612. 10-year certain: $597.)

The FCMM MIB is not the only method of providing reliable retirement income. But it can be a powerful tool for making retirement funds last a lifetime.