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Take Pension as Annunity or Lump Sum Payout?

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    Take Pension as Annunity or Lump Sum Payout?

    My FIL is eligible for his pension in the next months. He is debating his options and I wanted to get some advice on what you would choose and why?

    Single Life Annuity: $714/mo
    10 YR Certain: $651/mo
    50% Joint: $640/$320
    75% Joint: $608/$456
    100% Joint:$579.32/mo
    Lump Sum: $116k

    No major health issues besides a little more than normal wear and tear from yrs of working outside. Spouse is 1yr younger. Total retirement accts ~350k. No long term care insurance. He plans on working till the end of the next yr and then starting SSI and spouse plans on working as long as physically possibly.

    #2
    I wonder what his expenses are going to look like and what income he'll be getting from other sources (social security and any sort of pension from his spouse). I'd be far more tempted to take one of the annuity options if I knew it was going to be sufficient for a comfortable retirement

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      #3
      Originally posted by phantom View Post
      I wonder what his expenses are going to look like and what income he'll be getting from other sources (social security and any sort of pension from his spouse). I'd be far more tempted to take one of the annuity options if I knew it was going to be sufficient for a comfortable retirement
      I think thats a good point, but it is also tempting to take the lump sum payout and get a mutual fund. Based on several different balances fund returns over the past 10 years they could potentially get a better yearly payout doing this.

      Comment


        #4
        Originally posted by MooseBucks View Post
        Based on several different balances fund returns over the past 10 years
        Be careful about that. The past 10 years have been a tremendous bull market. It is unlikely that those returns will continue long term.
        Steve

        * Despite the high cost of living, it remains very popular.
        * Why should I pay for my daughter's education when she already knows everything?
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          #5
          I know my DH is getting the 100% joint!

          Statistically men die before woman. So many of my friends mom's were left with just SS because their husbands didn't take the joint option and it was a struggle for them.

          I don't think you said how old they are so I'd be thinking about health insurance too if they aren't old enough for medicare. And then with health insurance who knows how much money you need?? You can be well today and sick tomorrow.

          My vote is the 100% joint so your MIL is covered with a bigger payout after his death.

          Comment


            #6
            that 's 7.38% of the lump sum (for single life).. I think that's better than anything he can get in the open market right now .. unless he's really old

            Comment


              #7
              Originally posted by Captain Save View Post
              that 's 7.38% of the lump sum (for single life).. I think that's better than anything he can get in the open market right now .. unless he's really old
              Cause he is married the single life probably represents the greatest risk.

              Comment


                #8
                Originally posted by Thrif-t View Post
                I know my DH is getting the 100% joint!

                Statistically men die before woman. So many of my friends mom's were left with just SS because their husbands didn't take the joint option and it was a struggle for them.

                I don't think you said how old they are so I'd be thinking about health insurance too if they aren't old enough for medicare. And then with health insurance who knows how much money you need?? You can be well today and sick tomorrow.

                My vote is the 100% joint so your MIL is covered with a bigger payout after his death.
                the only thing is with joint, the pay per month is less. it really depends on the life expectancy of the pensioner. If he's expected to die young, then joint is better. If not, better to take the bigger payments. Say you invested the difference between joint and single, it likely would put you way ahead of joint assuming the pensioner lives long enough. If the non-pensioner spouse dies first, the joint is a waste. 23% difference is A LOT.

                Comment


                  #9
                  Sorry, off topic but so many issues affect retirement choices.

                  I hope FIL is assessing all aspects of retirement as he works through the numbers. I'm not sure what the 10 yr. 'certain' means; who holds the pension's levers? So many hold underfunded liabilities. What is the allocation of existing 401K? What is the percentage of growth? How do those holdings fit with FIL Pension holdings? The current thinking suggests retirees require funding for 35 years.

                  What are the family genetics of the couple like? Is there family history of cancer or heart disease for example? Any history of longevity?

                  What is the financial overview? Are there any outstanding debt like mortgage, vehicle loan, personal loan, line of credit etc?

                  Comment


                    #10
                    Of course a lot depends on your in-laws financial situation and the possibility of life insurance policies they may have. For me, I retired fairly young (54) and took a life time retirement with survivor benefits of nearly 100% for my wife. In your case maybe the joint 75% would be best, at least it's a piece of mind.

                    I think most people in a perfect world would like the surviving spouse to have the same continuing income after a spousal death. Nothing worse then seeing an elderly spouse trying to survive on Social Security for the rest of their life.

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                      #11
                      What else do they have saved? What do they owe? How old and what's his health like?
                      LivingAlmostLarge Blog

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                        #12
                        Originally posted by MooseBucks View Post
                        Cause he is married the single life probably represents the greatest risk.
                        Well I'm talking about the rate .. it's all proportional..the joint life rate is pretty good compared to what he can get with annuity in the open market.. again thats assuming hes in the 65 yo range. If hes older ..its probably on par or worse .

                        As far life ok only being the. biggest risk..that deoends on.a few things.. .. there's a lot we don't know

                        Comment


                          #13
                          Originally posted by MooseBucks View Post
                          My FIL is eligible for his pension in the next months. He is debating his options and I wanted to get some advice on what you would choose and why?

                          Single Life Annuity: $714/mo
                          10 YR Certain: $651/mo
                          50% Joint: $640/$320
                          75% Joint: $608/$456
                          100% Joint:$579.32/mo
                          Lump Sum: $116k

                          No major health issues besides a little more than normal wear and tear from yrs of working outside. Spouse is 1yr younger. Total retirement accts ~350k. No long term care insurance. He plans on working till the end of the next yr and then starting SSI and spouse plans on working as long as physically possibly.
                          Does the pension have a cost of living adjustment? If yes, how is it determined?

                          If it were me, I would want to know the answer before making my decision.

                          Comment


                            #14
                            Originally posted by Petunia 100 View Post
                            Does the pension have a cost of living adjustment? If yes, how is it determined?

                            If it were me, I would want to know the answer before making my decision.
                            No COLA.

                            Comment


                              #15
                              Originally posted by MooseBucks View Post
                              No COLA.
                              Then I would take the lump sum and roll it into my IRA. I would also make certain I had a good investment plan in place for my 466k.

                              Comment

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