Pension annuity question

[PandaBear]

I am planning to submit my paperwork to receive my pension (yay!)

I have made all of my decisions but one. I receive a small second annuity type benefit.

I can receive a cash payout of approximately $53,000, either to roll into a retirement account or as cash (I don’t plan to take in cash though)

I can receive an extra $323 per month for my life (and dh’s…..because I chose 100% survivor for my regular pension)

Or I can choose a period certain payment between 1-10 years.
3 years: $1640 per month
5 years: $1050 per month
10 years: $615 per month

I feel like this is similar to the social security question…..when to take?? In our case, we didn’t have any angst over when to take SS…..for better or worse, dh and I were in agreement about the decision with very little discussion. But this decision…..yikes!

Our pensions and SS cover all our needs and most of our wants.

I am leaning towards a period certain for maybe 10 years, as that would take us to when dh would have RMD’s from his retirement accounts (which are the bulk of our retirement savings).

Any thoughts??

 

[njhowie]

I have two pensions. One, I was able to take a lump sum, which I did upon separation. For the other, I had to make the choice you are confronted with.

Though we have "enough", I chose 100% survivor benefit for life. I began receiving it at age 57, and figured it's a nice monthly allowance, and DW will continue to receive it if I pass first.

 

[pb4uski]

I am planning to submit my paperwork to receive my pension (yay!)

I have made all of my decisions but one. I receive a small second annuity type benefit.

I can receive a cash payout of approximately $53,000, either to roll into a retirement account or as cash (I don’t plan to take in cash though)

I can receive an extra $323 per month for my life (and dh’s…..because I chose 100% survivor for my regular pension)

Or I can choose a period certain payment between 1-10 years.
3 years: $1640 per month
5 years: $1050 per month
10 years: $615 per month

I feel like this is similar to the social security question…..when to take?? In our case, we didn’t have any angst over when to take SS…..for better or worse, dh and I were in agreement about the decision with very little discussion. But this decision…..yikes!

Our pensions and SS cover all our needs and most of our wants.

I am leaning towards a period certain for maybe 10 years, as that would take us to when dh would have RMD’s from his retirement accounts (which are the bulk of our retirement savings).

Any thoughts??

The IRR of paying $53,000 today and receiving:

• $1,640/month for 36 months is 7.38%
• $1,050/months for 60 months is 7.25%
• $615/month for 120 months is 7.21%

All are very attractive period certain annuity IRRs... am I interpreting your OP correctly that the choices are between a $53,000 lump sum of those monthly payments?

For the joint life annuity you can compare to immediateannuities.com, but I would lean towards the $615/month... attractive rate for 10 years... assumes that the pension plan is in good shape and/or covered by PBGC.

 

[Irishgirlyc58]

How old are you?
I’m wondering how many years of the $323/month for life you or your husband would receive.

 

[38Chevy454]

I kind of like the 10 year $615 supplemental payment for the same reason that OP PandaBear mentioned - it gets them through the period between now and when her husband's RMDs kick in. OP and husband can always get more money if needed for a one-time large expense by taking a withdrawal from husband's retirement account. But if not needed, let the extra supplement pay out to cover most normal living expenses. Flexibility to let the retirement accounts grow, but available if needed before RMD kicks in.

 

[PandaBear]

How old are you?
I’m wondering how many years of the $323/month for life you or your husband would receive.

I will be 60 in april and my dh will be 64 in fall.
The “break even” point is about age 78. I would get about 73K over the ten years and reach that at 78. Beyond 78 and I would be money ahead.

 

[PandaBear]

Thank you for the comments. I like the others think the 10 year annuity might be best.

In my mind that will pay for one more vacation each year for 10 years.

 

[TheWizard]

You might want to reconsider whether 100% to survivor is the best option; it depends on your other finances, your total picture.

We hear a fair amount of concern about the survivor going from the 12% Federal bracket to the 22% bracket, for instance.
This is especially true for couples with a large combined tax-deferred balance.
In those cases, 75% or 50% to survivor might be better.
And with that, you get a larger amount per month while both are still alive...