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When it comes to planning for retirement, there are many options available for receiving a steady income during your golden years. One popular choice is to take a pension income, which provides a guaranteed payment from your employer or a retirement plan. Another option is to purchase an income annuity, which is a financial product that provides a steady stream of income for a specific period of time or for the rest of your life. While both options have their benefits, there are several reasons why taking a pension income may be the better choice for many retirees.
One of the main advantages of taking a pension income is the guaranteed nature of the payments. With a pension, you can rely on a set amount of income each month, which can provide peace of mind and financial stability in retirement. Annuities, on the other hand, are subject to market fluctuations and may not offer the same level of security as a pension. This can be particularly important for retirees who are looking for a predictable source of income that they can count on for the long term.
Additionally, taking a pension income can provide more flexibility and control over your finances in retirement. With a pension, you have the option to adjust your payments or make changes to the terms of the income stream, based on your individual needs and circumstances. Annuities, on the other hand, often come with more restrictions and may not offer the same level of flexibility in terms of accessing your funds or making changes to the payment schedule.
Furthermore, taking a pension income can also offer potential tax advantages. In many cases, pension income is taxed at a lower rate compared to annuity payments, which can help retirees maximize their retirement income and minimize their tax liabilities. This can be an important consideration for individuals who are looking to make the most of their retirement savings and optimize their financial resources during their golden years.
Finally, taking a pension income can also provide more transparency and certainty in terms of understanding the terms and conditions of the income stream. With a pension, retirees can have a clear understanding of how their payments are calculated, when they will receive their income, and what to expect in terms of the duration and amount of the payments. Annuities, on the other hand, can be more complex and may involve a variety of fees, expenses, and terms that can be confusing and difficult to understand.
In conclusion, while income annuities can be a valuable tool for providing guaranteed income in retirement, taking a pension income may offer several advantages that make it a more appealing option for many retirees. From providing a higher level of security and predictability to offering more flexibility and potential tax advantages, pension income can be a smart choice for individuals who are looking to secure a reliable source of income in their retirement years. It’s important to carefully consider the benefits and drawbacks of both options and consult with a financial advisor to determine the best strategy for your individual needs and goals.
Insurance Co.s are like Vagas. The house always wins.
I have another? about smokers and insurance. The say TOBACOO but don't ask about pot, I know several that have smoked it for YEARS every day, guess that don't count and I have no interest in it but enjoy get togethers at a fire pit.
#1 I chose the hit of $50 a month less so when I pass the wife gets the same.
#2 I dont think my pension goes up like S.S. its for life
# 3 Im tired of hearing about OH YOU GET A PENSION. Well I tell ya after 42 years I work the same job as someone in a private company and they get paid AT LEAST $6.00 more an hour than I ever did. And when is time for a new street or anything else I'm paying for your 401k, if you were smart enough to invest in one with your job we would make about the same. I'll add that being on call dang near 24/7/365. Most can't handle it cause they need a special license or permit to do jobs or because of random DRUG testing.
The IRS mandates the formula that qualified pension plans use to convert monthly pension payouts into Lu,p sum payouts. The formula uses a uniform life expectancy (combined male and female, smokers and non smokers, etc.) and 417e segment interest rates. When interest rates are low (as they were before the recent spike), then lump sum payouts are higher. When interest rates are high (as they are now) the lump sums are lower. If you beat the odds and live longer than the average American, then your lifetime earnings will be greater if you choose monthly payments rather than a lump sum.
Я счастлив что написал тебе коммент
Definitely don’t do an annuity! Sooo expensive and they don’t keep up with market returns. You’re much better off with the pension, unless they give you a huge lump sum that you can invest with much better returns.
Social Security wants people (who haven’t reached the age of 62) to die early.
I'm suspicious about the claim that buying an annuity protects you from market risk because the insurance company will probably take your money and invest it in the market! I recall hearing in 2008 that one of the big insurance companies was on the verge of defaulting on its annuity payments due to market losses.
My FIL took the lump sum way back in 1999 and ran out of money by 2008. I would always take the pension and I don’t even know the math.
Everyone I talk to says to take the lump sum, but my pension plan gives me a sense of security and has a small COLA.
If you are talking about a non-cola pension, just buy the current 20 year treasury that actually hit 5% this week. Do a 6 month ladder so you get a paycheck every month. Then you have annuity and full return of principle. Also, treasuries safer than pension funds and insurance companies.
Very dangerous to generalize Iike this. At least in our experience with companies around here, there isn’t an option to keep the pension or choose the lump sum. It is a choice of a private insurance annuity or lump sum payout. Companies are killing their pension programs and selling it off to insurers or paying out lump sum to the employees.
It also depends on how close you are to retirement – if the lump sum is moderate due to you being many years from retirement, since private pensions tend not to have COLA’s, the value of an annuity many years in the future might get killed by inflation. So you might want to take the lump sum.
In my case, the private insurance annuity being “sold off” by my employer, matched what my pension would have been to the dollar. Only because I was closer to retirement age, when I grew the lump sum by 6% per year until retirement and then applied the 4% rule, the equivalent income was a tiny portion of what my promised pension would have been. The private insurer annuity was a no-brainer.
For my younger friends at the company, the reverse was true and they took the lump sum.
BTW, those video example income stream discounts for 50% and 75% survivor benefits were far less aggressive than our pension rules ( and therefore matching private annuity rules). The monthly impact of 100% survivor is very painful for us, making it difficult to go that way. Thankfully we have sufficient retirement funds to backfill the pension if I die earlier.
@Josh, Immediate Annuities doesn't solicit via email… so if you want a more accurate statement, you can absolutely put your email address in.
Thank you
These money managers always push to get you to cash out your pension. Why? Because it’s more money under management for them, therefore higher fees. Many take the cash out but I’ve never once talked to anyone who regretted taking the monthly pension.
It all depends on your situation whether a fixed indexed annuity is right for a person. My work did not have an option for a retirement or pension plan. I started an IRA while in my 20's and built it to a point I could take a portion and do a fixed indexed annuity. It is a seven year annuitization and will serve as my pension along with my Social Security. By waiting 7 seven years and averaging 4.8% interest during that time without the worry of market ups and downs I have a peace of mind. I figured that at 78 I will have used the principal I put into it initially. I have let the remaining IRA money not transferred grow and really have no need for with my budget. I will transfer money from it when the markets are up for my entertainment until RMD's kick in.
I am single just retired I was offered $236K or $1842p mo $22,080. I took the Pension. Joint survivor wud have been $1750. The only it is fixed, NO COLA.
I get a lot of education from your channel, thank you!
How would you compare a pension of 75k a year (full amount) 67k (50% spousal benefit. So losing 8k a year for spousal benefit or a 20 year term life of 750k costing $160 month and keeping full 75k?
Absolutely correct.