Pension Annuity or Lump sum?

[pb4uski]

Yes but it has no cost of living increase. The value of the spouse annuity, given that she is 17 years younger and lives a normal lifespan, will decrease to chump change.

Perhaps, but the spouse is still doing a lot better than these spouses.

.... Husbands would tell their wives that they had chosen the survivors benefit and then they would become hysterical upon learning they lied. ....

^^^ Despicable.

 

[imoldernu]

Annuity purchased 1984 for $8,000.
Began taking $1225/mo. this year, for 5 years at age 83. $15K/year now helps. All transferrable 100%.
Almost forgotten... not too bad an ROI.
Inflation would have been $20,000 in total.. actual will be $75.000.

 

[Teacher Terry]

Rianne, there was nothing for the wives to look at. It was the employee’s private business. 40 years ago we couldn’t have told them if they inquired without their husband being present and giving us the go ahead. My dad took a smaller pension to protect my mom because his health was bad and he knew she would outlive him. She lived 17 years longer.

 

[Big_Hitter]

Yes but it has no cost of living increase. The value of the spouse annuity, given that she is 17 years younger and lives a normal lifespan, will decrease to chump change.

nope - the spouses annuity is much more valuable because she is 13 years younger - it appears to be worth about 15% of the lump sum

where did you study actuarial science?

 

[Big_Hitter]

Actually, 13 years younger... but your point is still valid.

typo - I used a 47 year old spouse in my calc

the annuity appears significantly more valuable than the LS

disclaimer: do your own calcs or hire an actuary

 

[pb4uski]

Annuity purchased 1984 for $8,000.
Began taking $1225/mo. this year, for 5 years at age 83. $15K/year now helps. All transferrable 100%.
Almost forgotten... not too bad an ROI.
Inflation would have been $20,000 in total.. actual will be $75.000.

Looks like ~3.75% annually to me.

 

[pb4uski]

typo - I used a 47 year old spouse in my calc

the annuity appears significantly more valuable than the LS

disclaimer: do your own calcs or hire an actuary

Preferably an actuary who doesn't make typos.

 

[LimaPop]

Can you marry someone on your death bed and pass the annuity to a much much younger person ?

 

[Big_Hitter]

Can you marry someone on your death bed and pass the annuity to a much much younger person ?

that's a pretty rare provision in defined benefit plans

i've seen that provision a few times in public sector defined benefit plans - essentially the benefit passes on (once, thankfully) to whomever you are married to when you die - it's an extremely expensive feature

regarding perpetuities, 401a9 requires that non-spousal beneficiaries be limited to a 50% J&S benefit

 

[Big_Hitter]

Preferably an actuary who doesn't make typos.

what do nearly retired actuaries know anyway?

 

[imoldernu]

I mentioned our annuity a few posts ago.
Yes... it's now working, but a little bit more about what happened in the interim between filing for the annuity, and why i'm down on Metlife.

It took four months and perhaps 25 phone calls and complaints to the Illinois attorney general, to go beyond the stalling and put offs by the company...
Metlife Brighthouse... a merge that even they don't understand.

A lawsuit Roycroft vs. Metlife, resulted in a $500 million escrow dismissal earlier this year. Basically based on the failure to pay 30,000 pension holders.

MetLife has now acknowledged that over the course of 25 years, it failed to keep
track of Beneficiaries, failed to contact them, and failed to pay them their benefits when due.
Instead of paying the annuity benefits to Beneficiaries or tendering them to states under unclaimed
property law, the Company took the money for itself and has acknowledged that it owes as many
as 30,000 Beneficiaries more than $500 million in annuity benefits. In admitting that it failed to
provide these annuity benefits, MetLife provided additional detail concerning its policies and
procedures concerning the payment of annuity benefits – which involved nothing more than
sending two letters, one when the Beneficiary turned 65 and one at age 70. If MetLife received no
response, it simply took the money for itself.

Put this in the category of opinion. Am still furious with the company for obviously stalling payouts to our policy.

Longer view... Based on the PBGC situation and looking ahead, am thinking that if this is the case with other plans, a lump sum may be a better choice.

Good luck in your choice.

 

[CRLLS]

I fought with MetLife on annuitizing my LI policy. It took several months of contacting local sales agents (MassMutual), applications, letters and phone calls to both ML and BH, and threats to contact my state's Dept. of Insurance. Finally got it worked out per our contract. I found that ML ended up paying much more than the cash out value of my policy to BH for them to handle my annuitization. I believe that BH is managing it on behalf of ML. Monthly checks come have ML written on them. It still isn't very clear to me. As long as the checks keep on coming...... Clearly, their spin off is a cluster **** for consumers if there ever was one. I think ML is still intentionally obfuscating things, relying on people finally giving up rather than to fight for what is contractually theirs.

 

[A Gold One]

Thank you to all for your feedback on this post

I have read all your responses and thought I'd share where I am leaning ATM.

What I heard in the feedback was that there is no right answer here, that as an annuity, the rate of return is not bad and that if I wanted to manage it myself with low cost funds in an IRA, I could probably do better and have the residual amount available for bequest.

One comment that struck a chord was that the pension income flow could be looked at as a diversification of income streams. This resonated with my portfolio situation and I am leaning in this direction.

Also based on some comments, I am waiting for cost of living increase details, actuarial calculations used and information about how fully the pension is funded.

Thanks again!