<p>Theoretically, they should be paying out in an actuarially neutral way. You can compare against commercial annuities (which should pay out less, since there’s a profit component for the insurance company). If they’re significantly different to the commercial policy, try to figure out why. </p>
<p>A lot depends on your assessment of your longevity odds. You know more about that than the insurance company does; they have to use actuarial tables. If your family tends to live a long time, and you’re In good health, go for the annuity. </p>
<p>A lot depends also on your desire to leave money to heirs or charity. </p>
<p>I have to admit that there’s a part of me that has, for me, made the lazy decision. We’ll see what we decide when my wife has to make the call. I like the idea that between SS and pensions, we can live well enough but not extravagantly, with a still considerable nest egg that we can keep in a relatively aggressive AA and use for luxuries, trips, gifts, and bequests. </p>
<p>As the saying goes, “you pays yer money and you takes yer choice.”</p>
<p>I’ve not received the package yet. I should receive it this week. If I remember correctly there was a lump sum amount before I left this company so I’ll shall see whether that’s the same amount is going to be lump sum amount.
I also remember this company underfunded its pension in the past. It has now caught up. Pension has no COLA, so no inflation protection. The pension amount is small, not a large chunk of our retirement account but nevertheless it’s a nice amount.
I’ve been thinking about it and I’m leaning toward taking the lump sum, if it’s what I think it is. The key factor is that I’m relatively young, I’m reasonably heathy, have more than 10+ years till 70.5, so I have time to let it grow. Hopefully I can grow 10 folds :D.
I can make up the difference by taking out that pension amount from my husband’s IRA/401k because he has to take it out anyway when he gets to 70.5.
So any hole with that thinking.</p>
<p>Bus, things are changing, my husband ex- employer offers 20% more to take lump sum distribution. I hope more companies are doing it, because there is less pension liability.</p>
<p>Dang, that’s great for your husband, DrG. I guess if they consider that people are living longer, they could have to pay a pension for 25-30 years, so that could be costly. In my companies case, they only pay pension for an average of two years after retirement until we die, so it is cheap for them, and they would never pay a lump sum. I plan on fooling them and defying the odds, personally. But particularly the fact that it sounds like you do well with your money, you and your husband would probably do better with a lump sum.</p>
<p>“And worst yet I have to make decision to transfer by Dec. Talk about pressure.” - Try not to stress too much. Either way, it’s great to have a pension. </p>
<p>When DH’s division was sold off, he had 18 years. At that point for the mini-pension we had option to take some cash (up to half) with rest as s annuity. We split our bets and did half cash, half annuity. </p>
<p>I wound up taking an annuity from an old pension plan instead of a lump sum. I anticipate getting that annuity for something like 30 years. (I have long-lived genes in my family.)</p>
<p>Joe Blow doesn’t get options, and IIRC generally to buy private stock you need to already have a certain amount of wealth, which is way beyond Joe Blow.</p>
<p>It’s an abuse though IMO, especially with the Roth. What to do about it? Prohibit non-public stock on a tax-advantaged account. Force an immediate distribution if the balance gets over $10 mil, and make it taxable even if it came from a Roth. Force RMDs from a Roth at age 70 and make distributions over, say, $500k/year taxable. Remove the estate-planning features from retirement accounts.</p>
<p>Just throwing out ideas…</p>
<p>I’m becoming convinced that Roths are bad policy.</p>
<p>I checked my account online and found out the lump sum amount is a lot smaller than what I remember, perhaps 20% less. So I’m not going to take the lump sum option. The second option is immediate pension starting this Dec, the annual amount is 8.56% of the lump sum for single annuity, and 7.9% of the lump sum with 75% survival for spouse.The third option is the existing one, and I did a quick calculation on the website, the second option is much more profitable than the third option.
I’ll probably will live at least 30 years, plus I’ve already have investment outside of this pension that I invest by myself. There is no need to dump all the risk in one type of investing, just in case I’m wrong. I could also take the annual pension and invest in stocks if I like. But I’m sure I can only do that for about 10 years, after that I won’t be that interest as much and probably indexing.
So I will go with the second option. Just don’t like to pay more tax while I’m working but it won’t be many years before I retire. So that looks like the best option.</p>
<p>" It’s an abuse though IMO, especially with the Roth. What to do about it? Prohibit non-public stock on a tax-advantaged account. Force an immediate distribution if the balance gets over $10 mil, and make it taxable even if it came from a Roth. Force RMDs from a Roth at age 70 and make distributions over, say, $500k/year taxable. Remove the estate-planning features from retirement accounts.</p>
<p>Just throwing out ideas…</p>
<p>I’m becoming convinced that Roths are bad policy."</p>
<p>I do think that Roth’s might be bad policy, however, I think that part of the point is to get people to convert so they can get the tax revenue right now. Typical strategy of getting the goodies now, and paying later. Perhaps a big mistake.</p>
<p>However, changing the rules after people have already taken action, is basically scamming the taxpayers. It’s one thing to change future policy, another to change and double tax people. Might not sound so bad when you’re talking about balances over 10 mil (because that doesn’t affect most), but what about if they change it to 1 mil? Or 100K? or $10? Okay, change it all for future contributions, but it seems completely unethical to change the rules, making it retroactive to earlier decisions people have made. Then again, one could never accuse the senators with their hands in our pockets of being ethical. No doubt they’d get an exception for politicians.</p>
<p>Dr. G, if you are married, your spouse will have to waive the survivor rights. Automatic form of a defined benefit pension to a married participant is Joint & 50% survivor annuity. Unless your spouse has his/her own pension and Social Security that is sufficient to cover retirement, I’d think twice (and run numbers).</p>
<p>I used to be a pension administrator for a consulting company and had a case where the employee was retiring to take care of her seriously ill spouse. They decided to take the single life annuity so they’d have more income. The retiree died three weeks after her pension started; surviving spouse got nothing. I had talked to the participant and the HR admin at the company about the risks of waiving a survivor annuity, but noone listened. I was terribly upset.</p>
<p>Beyond her filing status changing from married to single -no. My pension will be a set monthly payment. The last estimate I received lowers my maximum payment by 12% to leave 100% survivor benefit to my spouse. So if I was going to get a $5,000 a month benefit with no survivor benefit we would get $4,400 for this option.</p>
<p>My DH has not elected which pension option he will want, from his former employer. Is that to be done before he wants to start to collect it (he thinks not)? What would happen if he doesn’t elect it yet and something happens to him?</p>