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Old 07-22-2008, 08:39 AM   #141
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Tough choice and 90% choose the lump sum apparently, although I expect I will be choosing the pension for my main employee pension in 2010. A couple of years ago I started receiving a pension from a former employer. I had the choice of a lump sum or pension, and decided on the pension.

The best way to take a pension - Jul. 1, 2008


One thing these days is that a pension is insured up to a certain value following some big name pension catastrophies in recent years, and the pension funding is more tightly regulated than it used it be to also.
I can tell you that in my professional capacity I have seen numerous occasions when the lump sum option has worked out very badly for unsophisticated recipients. It's very easy for people here, generally highly knowledgeable investors, to pontificate how it makes no sense to purchase annuities or take a defined-benefit pension from a company (in which case the total PBGC-insurance is capped at around $51K annually), when one can make his own investment decisions and replicate all of the essential features of a SPIA all by himself. This do-it-yourself approach can go badly for a vast majority of people. Annuities have their place for many; it's not something I would recommend for myself or anyone who can adequately manage their own portfolio of securities, but I know a lot of family members I wouldn't hestitate to suggest that they look into this because of KISS and because the risk of self-inflicted harm is very real to them if they start trying to manage their own portfolio.
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Old 07-22-2008, 10:05 AM   #142
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Isn't it true that if you need LTC and don't have insurance, the nursing home can come after your portfolio, but not a fixed annuity? I mean sure, they can probably take the income stream if you owe it...but that seems a bit different than taking your portfolio. For example, if you go in for 2 years, they might go through your entire portfolio in that time, whereas with an annuity you'd continue to have income even after coming out of the nursing home.
They CAN take a FIXED ANNUITY, but NOT an SPIA...........

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I know one other advantage of annuities (at least fixed ones) is that they are "unattachable" in most states in the cases of bankruptcy or lawsuits.
That is the case most but not all of the time.........
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Old 07-22-2008, 10:06 AM   #143
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I can tell you that in my professional capacity I have seen numerous occasions when the lump sum option has worked out very badly for unsophisticated recipients. It's very easy for people here, generally highly knowledgeable investors, to pontificate how it makes no sense to purchase annuities or take a defined-benefit pension from a company (in which case the total PBGC-insurance is capped at around $51K annually), when one can make his own investment decisions and replicate all of the essential features of a SPIA all by himself. This do-it-yourself approach can go badly for a vast majority of people. Annuities have their place for many; it's not something I would recommend for myself or anyone who can adequately manage their own portfolio of securities, but I know a lot of family members I wouldn't hestitate to suggest that they look into this because of KISS and because the risk of self-inflicted harm is very real to them if they start trying to manage their own portfolio.
That unforutnately is true............
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