Your Excess, Their Commission: Why the FDNY Fund Beats Every Annuity We Tested

Six real annuities, one $250,000 excess, and a 7% portfolio, compared head to head.

By John D. Traut, AWMA® · November 2026 · 14-minute read

The pitch you're about to hear

The pitch usually comes at the retirement seminar, at the kitchen table, or over a free steak dinner an advisory firm hosts for retiring members: roll the excess out, put it in a "guaranteed" product, never worry again. Below are the actual numbers for six annuities — four sold in New York, two sold outside it, identified by number only — against three things you can do with your own money: leave it with the Fund, leave it with the Fund and invest the checks, or invest it yourself. Each chart has a short note above it explaining how to read it.

What your excess is, and what you can do with it

Your excess is everything in your account above the minimum required contributions, which are fixed on your 20th anniversary. It exists because you waived ITHP or made the voluntary 50% additional contributions, and it has been earning 8¼% a year. This applies to Tier 2 members, who joined between July 1973 and June 2009. (FDNY Tiers 1 & 2 SPD; Fire Pension Fund ACFR, FY2025)

At retirement you have three real choices:

The Fund converts excess into pension by dividing your balance by the annuity factor for your age at retirement. For service retirees appointed after March 25, 2001, that's FDNY Table #11 (2001 Basis Annuity Factor): 12.920 at age 45, so $250,000 buys $19,350 a year for life. Members appointed on or before 3-25-2001 and disability retirees use different tables; your Fund retirement estimate shows your exact figure.

The retiree, the assumptions and the six annuities

Our example member is a Tier 2 firefighter, male, retiring at 45 with 21 years and $250,000 of excess — a realistic balance for someone who waived ITHP for a full career; actual FDNY retirements we've worked on run roughly $200,000 to $400,000. The portfolio is a diversified 60/40 stock/bond mix earning 8% gross minus 1% all-in advisory and fund costs: 7% net. The variable annuities get the same 8% gross market return, minus their own charges. Annuities 5 and 6 were illustrated for a 55-year-old with $300,000, so those comparisons use that age and amount. Everything is pre-tax and nominal, and every dollar figure scales in a straight line with your balance.

Is 7% realistic?

A 60/40 portfolio has earned 7% or more after a 1% fee in 85% of rolling 30-year periods since 1928, and cleared 6% in 96%. Over the full 1928–2024 span it returned 7.28% a year after the fee.

Head-to-head #1: income now (Annuity 1 vs. the Fund vs. investing)

Annuity 1 loses to the Fund on every line. Both are life-only, both stop at death, both are flat with no COLA — and the Fund pays $3,482 more every year, with no NYS or NYC income tax on it. By age 79 (average remaining lifespan for a 45-year-old man is 34.2 years per the SSA period life table) that gap is $121,882.

How long until investing beats Annuity 1? It never falls behind. At 7% the account keeps growing while paying Annuity 1's check every year: $322,129 at 79 and $477,487 at 95.

Against the Fund, the answer is different. Taking the Fund's full $19,350 from a 7% portfolio empties it at 72. If guaranteed lifetime income is the goal, the Fund's own annuitization is the best annuity deal available to you — which is exactly why buying a commercial one makes no sense.

The 72(t) catch. Money rolled to an IRA can't be withdrawn before 59½ without the 10% penalty unless you follow a 72(t) schedule; at 45 the IRS's 5% rate caps that around $14,456 a year on $250,000. An immediate annuity bought inside the IRA qualifies as a life-payment schedule, but it still pays less than the Fund, so this doesn't rescue it.

Head-to-head #2: growth now, income later (Annuities 2 and 3)

The variable annuity pitch is "market upside plus a guaranteed income base that grows 5–6% a year." The catch is that the income base is not money — it's a number used to calculate your check — and you pay about 3.5% a year to grow it.

Annuity 2: the income base reaches $605,048 by 65, paying $34,185 a year. Charges of about 3.5% a year leave the cash value growing around 4.5% before 65, and it shrinks once withdrawals start: $215,220 at 90.

Annuity 3: $33,337 a year; $272,948 of cash value at 90.

The portfolio pays the identical $34,185 and holds about 4x the annuities' cash value at 79 and 14x at 90. Or it can pay a 5% draw — $48,371 a year, 41% more than Annuity 2 — and still grow.

How long until investing beats Annuities 2 and 3? It's ahead at every age. To fall short of Annuity 2's income through 95, the portfolio would have to net less than 4.43% a year for 50 years (4.35% for Annuity 3) — a level a 60/40 portfolio has beaten in every 30-year period since 1928.

Head-to-head #3: the fixed indexed annuity (Annuity 4)

Annuity 4 is the only indexed annuity sold in New York with a lifetime income rider, and it has no rider fee. Your principal can't drop with the market — but the S&P 500 gain you're credited is capped at 5.50% a year, and the money is locked behind a 7-year surrender schedule.

Credited at a realistic 3.5% a year, $250,000 grows to $418,837 by 60. Income at 7.40% is $30,994 a year for life.

The portfolio pays the same check and still holds $1,309,590 at 79, when Annuity 4's cash value is gone. To fall short of Annuity 4's income through 95, it would have to net under 5.14% a year. The real value of an indexed annuity is downside protection — worth something to a nervous investor, but you pay for it by giving up most of the market's upside for 15 years.

Head-to-head #4: the 30% "pop" bonus annuities (Annuities 5 and 6)

The richest bonuses are on two fixed indexed annuities illustrated in 2026 for a 55-year-old man putting in $300,000, as a Connecticut resident. Both add 30% to the income base on day one. Neither adds a dollar to your cash.

The marketing leads with the bonus. The guaranteed ledger shows the cash: $300,000 at issue, flat at 0%, eaten by a 1.10% fee charged on a bigger base, then drawn to $0 within four years of the first check.

The same $300,000 at 55 has better options. The Fund pays $25,893 a year for life starting immediately (Table #11 factor 11.586). A 7% portfolio grows to $420,766 by 60 or $675,657 by 67, then pays the same checks the annuity would:

• Investing at 7% net and taking Annuity 5's $29,397 from 60: $338,725 left at 79, $216,497 at 90, lasts to 100.
• Investing at 7% net and taking Annuity 6's $54,699 from 67: $449,440 left at 79, lasts to 91.

The Fund beats both on return at every age.

These are the strongest commercial annuities we found, and the bonus does real work if you live long. But to beat a 7% portfolio, Annuity 6 needs you to live past 91, and it never beats the Fund. What pays for the bonus: a 10-year lockup, a fee charged on money you don't have, caps that leave your cash earning 1–3%, and a contract worth $0 to your family by your early 70s.

The better move: bank the Fund checks

You don't have to choose between the Fund's guarantee and an annuity's bigger check. Leave the excess with the Fund, invest every check until the age the annuity would start paying, then pay yourself the annuity's check: the Fund's check plus a top-up from what you banked.

Example, Annuity 2. From 45 to 64 you bank 20 Fund checks: 20 × $19,350 = $387,000 before any growth. At 65, Annuity 2 would pay $34,185. The Fund pays $19,350, so you pull $14,835 a year from the banked money. From 65 to 95 that's $459,890 — so the banked money needs to earn just 0.68% a year to keep paying Annuity 2's check for life. At 7% it's still worth $1,942,934 at 79.

Annuity 6 is the only case where the banked money has to really work, and a 60/40 portfolio earned 5.34% or more after fees in every 30-year period since 1928. The Fund's part of that income is guaranteed for life, just like the annuity's; only the top-up depends on the banked money.

The ranking

We scored every option by what it's worth at 79 (average life expectancy) and at 90: all income received plus money still in the account (cash value, for the annuities). From each annuity's start date, every option pays the same check except "Fund only," which spends the Fund checks from day one.

Total payment schedule: $250,000 excess, income from age 45

Why a firefighter is the last person who needs another annuity

An annuity insures against one risk: outliving your money. An FDNY service retiree already owns the biggest, cheapest version of that insurance in the city.

• Your pension is a life annuity. 50% of final salary plus 1/60th of earnings after your 20th anniversary, paid for life, plus the $12,000-a-year Variable Supplement — and service pensions are exempt from NYS and NYC tax (FDNY Tiers 1 & 2 SPD).
• Social Security comes later on top of whatever you earn in a second career. Many members retire in their 40s and keep working. Money you don't need for 15–20 years should be compounding, not paying a 2–4% insurance toll.
• Annuities lock up liquidity. Surrender charges run 7 to 10 years on the growth annuities above, starting as high as 9.2%. Excess you might need for a house, a kid's tuition or a business shouldn't be behind a gate.
• Life-only payments die with you. Every annuity above leaves $0 to your family under its maximum-income option once the cash value is gone.

When an annuity can make sense:

1. The Fund's own annuitization, if you want more guaranteed lifetime income and don't need the money as a lump sum. At $19,350 a year on $250,000 at 45 (Table #11), it beats every commercial product, and a portfolio would need to net 8.23% to match it through 95. Invest the checks you don't need yet and it beats everything.
2. A disciplined-behavior case. If you know you'd spend a lump sum, a guaranteed check protects you from yourself. The Fund still does this better.
3. Late-life longevity insurance (a deferred income annuity bought in your 70s or 80s) for someone with no pension — which describes almost no FDNY retiree.

Bottom line

With $250,000 of excess, there are three good answers and one bad one:

Before you sign: check who's pitching you

A lot of these pitches start with an invitation: a free steak dinner at a nice restaurant, hosted by an advisory firm and billed as a "retirement workshop" or "pension seminar" for city workers. The dinner is paid for by the sales it produces. When the SEC, FINRA and state regulators examined 110 firms running "free lunch" seminars, every seminar was a sales presentation even when advertised as educational; half used exaggerated or misleading claims, 23% showed signs of unsuitable recommendations, and 13% appeared fraudulent and were referred for enforcement (SEC, 2007).

Enjoy the steak. Don't sign anything at the table, and do your homework on the person before you meet again:

1. Look them up on FINRA BrokerCheck and the SEC's Investment Adviser Public Disclosure site. Both are free. They show which exams the person has passed, every firm they've worked for, and any customer complaints, regulatory actions or firings. The licenses tell you what they're allowed to discuss with you.
2. Know what the licenses mean (Chart 15 below). Selling a variable annuity takes both a securities license and a state insurance license. Fixed, indexed and immediate annuities take only the insurance license.
3. If they're not on BrokerCheck at all, they may hold only an insurance license. That's enough to sell Annuities 1, 4, 5 and 6, but not to advise you on investments. Verify the license with the New York Department of Financial Services or your own state's insurance department.
4. Ask how they get paid, in writing. "What do you earn if I buy this?" Most annuities pay the seller a commission from the insurer; an investment adviser charges a fee you can see on your statement. Many advisers hold both kinds of license, so ask which role they're acting in for this recommendation.
5. Ask for the guaranteed-only illustration, the full fee list and the surrender schedule, and set them next to your FDNY retirement estimate. In New York, anyone recommending an annuity must act in your best interest and document why it suits you under DFS Regulation 187, which the state's highest court upheld in 2022 (Insurance Journal). Ask for that paperwork.

Your numbers will be different

Every figure in this article is for one example: a 45-year-old man with $250,000 of excess (a 55-year-old with $300,000 for Annuities 5 and 6). Your age at retirement changes the Table #11 factor and what every annuity pays. So do your appointment date and Tier, service versus disability retirement, your health, whether you're married, your other income, taxes, and how soon you'll need the money. Any of these can change the math, and for some members it can change the answer.

I'd be glad to run the numbers for your situation side by side: leaving it with the Fund, investing it yourself, banking the checks, and any annuity you've been shown. The goal is simple: that you make this decision with confidence and with all the facts, whichever way you go.

I hold the Accredited Wealth Management Advisor™ (AWMA®) designation from the College for Financial Planning. My Series 7 and Series 66 registrations are held through LPL Financial LLC, and I provide investment advice as an investment adviser representative of Stratos Wealth Partners, Ltd., a registered investment advisor. My practice focuses on first responders and others with public pensions, including helping members weigh their pension excess options at retirement.