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Looking at my pension, I have a choice to make concerning the payment options. The single life annuity option pays $500/month for the rest of my life, nothing for the wife if I die. 10 year certain and life pays $470/month (I think that's $470/month as long as I live, but nothing for my wife if I die after 10 years), 20 year certain and life pays $420/month, and $850/month for 10 years regardless of date of death.
My current spreadsheet has budgeted +/- $500/month from this pension(no big difference if it's $420 or $500). It is a non-COLA pension.
I am thinking about taking the $850/month. If I took that amount, utilized the $500/month, I could divert the extra $350/month into an IRA, escaping taxes and allowing the money to grow. After 10 years, I will have invested $42k, and without any growth, enough to fund the $500 hole for another 7 years, with some growth, even more. Since there's no cola involved, the investments may make up the inflation protection.
I will be 60 in September when the pension is claimed, and have a current life expectancy of 83.
I'd appreciate any thoughts/ideas/variations. I am new to this annuity thing.
My current spreadsheet has budgeted +/- $500/month from this pension(no big difference if it's $420 or $500). It is a non-COLA pension.
I am thinking about taking the $850/month. If I took that amount, utilized the $500/month, I could divert the extra $350/month into an IRA, escaping taxes and allowing the money to grow. After 10 years, I will have invested $42k, and without any growth, enough to fund the $500 hole for another 7 years, with some growth, even more. Since there's no cola involved, the investments may make up the inflation protection.
I will be 60 in September when the pension is claimed, and have a current life expectancy of 83.
I'd appreciate any thoughts/ideas/variations. I am new to this annuity thing.