I’ll answer a question with a question: Why do lottery winners always take lump sums rather than payments? It’s a guaranteed return vs.a variable return with growth potential based on management.
Two thoughts: Can you do as well or better than the managers of your annuity? And, what is the end result of the annuity when one passes and also when both have died? Will anything be passed on to beneficiaries? This can be a big plus for the lump sum option.
I am going back and forth. I am currently 58 and wanting to retire before FRA. The long term annuity option offers continuity in payments, not a great return (but they’re not known for that, right?) However, if I take an immediate annuity, it might satify both worlds – security and increased time for the retirement accounts to grow – without having to deal with the self provoked stress of managing withdrawal schedules, buckets, and so forth for a bit longer.
I took the pension as it exceeded any annuity I could have obtained on my own. This year has made me feel good about my choice. With Social Security and the pension, my base spending is more than covered.
I took my two pensions(GE and company who purchased after). Both insured, PBGC, wanted that security every month. Some of my co workers took lump sums working with their advisors. Im now waiting to collect SSI.
Wow…give me the money! If I needed to do it hands off I’d just put 100% in VWINX or VWENX or a combination of the two and not even think about it again. But trusting my former company, the PBGC, or some manager that ends up slicing it into 15-20 funds when I can’t pay attention anymore? No thanks.
Another “it depends” is whether you have a significant portion of assets in taxable accounts. If so, taking the lump sum and thereby minimizing taxable income could enable taking long term capital gains at the zero percent federal tax rate. If most of your assets are in retirement accounts, not a significant consideration.
It depends. Do you already have more than adequate, guaranteed, inflation-indexed retirement income, say from a prior employer’s plan, a spouse’s employer’s plan, Social Security, etc.
It depends. Have you accumulated more than $5,000 in your employer sponsored plan? If so, there is a third choice, leave the money in the plan until normal retirement or the required beginning date / leverage fiduciary /bankruptcy protections.
it depends. Are you age 55 and separated from that employer, or age 59 1/2 or older? Are you planning to relocate? Are you going to have a period without any other income? Pay attention to taxes.
It depends? Would it make more cents, remember, it’s not what you get that counts, but what you get to keep after taxes, to lump sum, rollover and time ad-hoc payments from an IRA. Pay attention to taxes.
It depends. Did you compare the annuity in the plan with a rollover and annuity purchase via an IRA? Because the plan has to use unisex mortality, some might do better with sex distinct pricing. And, as interest rates rise, (I guess that is “if” and “when” the plan may be slower to react.
It depends. Did you compare the option of installment payments (either from the plan where permitted, or via an IRA after rollover), coupled with a qualified longevity annuity contract?
I could go on but here’s the last It depends. Did you consider using the money as needed to “buy” an added Social Security benefit – guaranteed, inflation indexed, retirement income? One positive about this option is that you can always change your mind before age 70 and start the SS benefit.
I’ll answer a question with a question: Why do lottery winners always take lump sums rather than payments? It’s a guaranteed return vs.a variable return with growth potential based on management.
Two thoughts:
Can you do as well or better than the managers of your annuity?
And, what is the end result of the annuity when one passes and also when both have died? Will anything be passed on to beneficiaries? This can be a big plus for the lump sum option.
I am very content living on monthly RMD payments from my 403b. I am 74, retired for 8 years, have no pension but waited until 70 to draw socsec.
It really depends on what you need. Spouse and I crunched the numbers and decided to take the annuity. Having a guaranteed income floor is assuring.
I am going back and forth. I am currently 58 and wanting to retire before FRA. The long term annuity option offers continuity in payments, not a great return (but they’re not known for that, right?) However, if I take an immediate annuity, it might satify both worlds – security and increased time for the retirement accounts to grow – without having to deal with the self provoked stress of managing withdrawal schedules, buckets, and so forth for a bit longer.
I took the pension as it exceeded any annuity I could have obtained on my own. This year has made me feel good about my choice. With Social Security and the pension, my base spending is more than covered.
This just came out:
https://ofdollarsanddata.com/why-you-might-want-to-retire-soon-if-you-have-a-pension/
I took my two pensions(GE and company who purchased after). Both insured, PBGC, wanted that security every month. Some of my co workers took lump sums working with their advisors. Im now waiting to collect SSI.
Wow…give me the money! If I needed to do it hands off I’d just put 100% in VWINX or VWENX or a combination of the two and not even think about it again. But trusting my former company, the PBGC, or some manager that ends up slicing it into 15-20 funds when I can’t pay attention anymore? No thanks.
Another “it depends” is whether you have a significant portion of assets in taxable accounts. If so, taking the lump sum and thereby minimizing taxable income could enable taking long term capital gains at the zero percent federal tax rate. If most of your assets are in retirement accounts, not a significant consideration.
It depends. Do you already have more than adequate, guaranteed, inflation-indexed retirement income, say from a prior employer’s plan, a spouse’s employer’s plan, Social Security, etc.
It depends. Have you accumulated more than $5,000 in your employer sponsored plan? If so, there is a third choice, leave the money in the plan until normal retirement or the required beginning date / leverage fiduciary /bankruptcy protections.
it depends. Are you age 55 and separated from that employer, or age 59 1/2 or older? Are you planning to relocate? Are you going to have a period without any other income? Pay attention to taxes.
It depends? Would it make more cents, remember, it’s not what you get that counts, but what you get to keep after taxes, to lump sum, rollover and time ad-hoc payments from an IRA. Pay attention to taxes.
It depends. Did you compare the annuity in the plan with a rollover and annuity purchase via an IRA? Because the plan has to use unisex mortality, some might do better with sex distinct pricing. And, as interest rates rise, (I guess that is “if” and “when” the plan may be slower to react.
It depends. Did you compare the option of installment payments (either from the plan where permitted, or via an IRA after rollover), coupled with a qualified longevity annuity contract?
I could go on but here’s the last It depends. Did you consider using the money as needed to “buy” an added Social Security benefit – guaranteed, inflation indexed, retirement income? One positive about this option is that you can always change your mind before age 70 and start the SS benefit.