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Old 04-16-2011, 04:50 PM
Hal :-) Hal :-) is offline
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Quote:
Originally Posted by Snowbirdtobe View Post
The company will buy an annuity for me as my pension and I cannot take a lump sum.
I must pick from a list of options and need to make that choice before I take any money.
My guess is that they get better tax or accounting results by getting the pension off the books.
If I had the option I would take the money and run.
I had the same thing. I think it's typical for companies to hand it off to a third-party, as you said, get it off the books. I don't think there is much difference between an annuity and a pension. Except, the employer-sponsored pension is guaranteed by the PBGC.

The option selection is usually a personal decision. For me it all came to financial. I had no good insight regarding health and life expectancy. Poor health or chronic illness could be a decision point. But if you consider average life expectancy and say maybe, maybe not, it's a useless factor. No one can predict terminal illness or accident. My wife has a small pension (25% of mine) so I selected 75% J&S on mine and single life on her's. The survivor will effectively have about 100% of mine.

Avoid the insurance option. I suspect your planner that suggested it sells insurance. Essentially, the discount for 100%, 50%, or anything other than individual life, is an insurance premium for J&S. There's no reason to think you can go elsewhere and do better. Unless you go with Term insurance, in which case it's not apples to apples.

Typically, if you're married, the default is 50% (the spouse has to sign-off for anything else). 50% is probably a bad choice for the survivor. Unless you're in the public sector, you likely don't have a COLA and the pension will be eaten away by inflation over the years anyway. But 50% will be a huge cut. Living cost won't be noticeably reduce and may even increase if there are everyday task that the survivor isn't capable of taking over.

It a tough decision. You only get one shot. Give it a lot of thought.