pensions

These days, more and more companies are giving you the option of taking your pension as a lump sum distribution instead of an annuity payout. Pension buyouts can be offered to both current and former employees.

Typically, the choice given is to (1) accept the pension buyout offer and rollover the lump sum into an IRA or 401(k) type plan, or (2) do nothing and collect your pension at retirement in the form of payments for life.
Keep the monthly payments – Pension plans typically provide a monthly benefit beginning at retirement for the rest of your life. Some may even continue to provide benefits to your spouse after your death
  1. Does your pension payment grow with inflation?
  2. Does your pension amount continue to grow when you are no longer employed with that company?

Taking the lump-sum rollover – Accepting a lump-sum rollover provides you with flexibility to invest the funds any way that you would like and to also to give remaining assets to your heirs or charity after your death.  You can even take some or all of the proceeds and purchase an individual annuity with custom features.

  1. If you invest or purchase an annuity with the proceeds you may not be able to match the performance of the original pension payout.

It can be a difficult choice and one that should be made with respect to your overall financial goals and considering the following:

  1. Your retirement expenses / incomes
  2. Longevity / health Estimates
  3. Estate Planning / Goals for Heirs