MegaCorp Pension options: What would you do?

[sheldon cornped]

I ran my Company's pension options below assuming I retire and begin receiving benefits at 62. I am 58 1/2 now, have 401k, IRA's and decent liquid assets. DW is 54, recently retired from teaching but plans to either do something part-time or possibly full, just not teaching. Megacorps pension plan is about 140% funded, making it one of the top plans in the country. I'm just not sure if I should go with the split benefit (lump sum plus monthly payment) or go with one of the annuity plans. I would be interested in anyone's comments given their personal circumstances if they had these options or just general opinions about pro's/cons of lump sum vs. annuity. Sorry, I know this is quite a menu and it didn't post neatly from my spreadsheet, but here it is:

Monthly Payments1

Form of Payment To You To Your Beneficiary

Single Life Annuity $4,774 $0

25% Joint and Survivor $4,587 $1,147

50% Joint and Survivor $4,420 $2,210

66 2/3% Joint and Survivor $4,310 $2,875

75% Joint and Survivor $4,263 $3,197

100% Joint and Survivor $4,115 $4,115

25% Pop-Up Joint & Survivor $4,573 $1,143

If your beneficiary dies before you, your amount will increase to $4,774.


50% Pop-Up Joint & Survivor $4,387 $2,193

If your beneficiary dies before you, your amount will increase to $4,774.


75% Pop-Up Joint & Survivor $4,215 $3,161

If your beneficiary dies before you, your amount will increase to $4,774.


100% Pop-Up Joint & Survivor $4,057 $4,057

If your beneficiary dies before you, your amount will increase to $4,774.


5 Year Certain and Continuous

Before 01-01-2021 $4,735 $4,735

Beginning 01-01-2021 $4,735 $0

10 Year Certain and Continuous

Before 01-01-2026 $4,626 $4,626

Beginning 01-01-2026 $4,626 $0

15 Year Certain and Continuous

Before 01-01-2031 $4,468 $4,468

Beginning 01-01-2031 $4,468 $0

20 Year Certain and Continuous

Before 01-01-2036 $4,296 $4,296

Beginning 01-01-2036 $4,296 $0

Annuity and Cash Balance2 $4,559 $0

Increasing Single Life Annuity $3,647 $0

SSNRA Level Income

Before 01-01-2020 $6,773 $0

Beginning 01-01-2020 $4,027 $0

Age 65 Level Income

Before 01-01-2019 $6,804 $0

Beginning 01-01-2019 $4,243 $0



Form of Payment One-Time Payment Monthly Payments1



To You To Your Beneficiary Single Life Annuity --
$0
Partial Lump Sum $508,059 -- --
25% Joint and Survivor -- $1,685 $421
Partial Lump Sum $508,059 -- --
50% Joint and Survivor -- $1,624 $812
Partial Lump Sum $508,059 -- --
66 2/3% Joint and Survivor -- $1,584 $1,056
Partial Lump Sum $508,059 -- --
75% Joint and Survivor -- $1,566 $1,175
Partial Lump Sum $508,059 -- --
100% Joint and Survivor -- $1,512 $1,512
Partial Lump Sum $508,059 -- --
25% Pop-Up Joint & Survivor -- $1,680 $420
If your beneficiary dies before you, your amount will increase to $1,754.


Partial Lump Sum $508,059 -- --
50% Pop-Up Joint & Survivor -- $1,612 $806
If your beneficiary dies before you, your amount will increase to $1,754.


Partial Lump Sum $508,059 -- --
75% Pop-Up Joint & Survivor -- $1,549 $1,161
If your beneficiary dies before you, your amount will increase to $1,754.


Partial Lump Sum $508,059 -- --
100% Pop-Up Joint & Survivor -- $1,491 $1,491
If your beneficiary dies before you, your amount will increase to $1,754.


Partial Lump Sum $508,059 -- --
5 Year Certain and Continuous
Before 01-01-2021 -- $1,740 $1,740
Beginning 01-01-2021 -- $1,740 $0
Partial Lump Sum $508,059 -- --
10 Year Certain and Continuous
Before 01-01-2026 -- $1,699 $1,699
Beginning 01-01-2026 -- $1,699 $0
Partial Lump Sum $508,059 -- --
15 Year Certain and Continuous
Before 01-01-2031 -- $1,642 $1,642
Beginning 01-01-2031 -- $1,642 $0
Partial Lump Sum $508,059 -- --
20 Year Certain and Continuous
Before 01-01-2036 -- $1,578 $1,578
Beginning 01-01-2036 -- $1,578 $0
Partial Lump Sum $508,059 -- --
Annuity and Cash Balance2 -- $1,675 $0
Partial Lump Sum $508,059 -- --
Increasing Single Life Annuity -- $1,340 $0
Partial Lump Sum $508,059 -- --
SSNRA Level Income
Before 01-01-2020 -- $3,753 $0
Beginning 01-01-2020 -- $1,007 $0
Partial Lump Sum $508,059 -- --
Age 65 Level Income
Before 01-01-2019 -- $3,785 $0
Beginning 01-01-2019 -- $1,224 $0
Partial Lump Sum $508,059 -- --

[pb4uski]

Generally the best way to assess this is to look at the lump sum compared to the change in monthly benefit and the monthly benefit of a single premium immediate annuity at immediateannuities.com, Vanguard, Berkshire, etc.

[MooreBonds]

One other idea that some use is to price up a term life insurance policy for you (and/or spouse's) particular health conditions.

If you elect to take a full or partial pension, it can make more sense to buy a term life policy (for 10 or 15 years), and then take the pension where it doesn't pay your survivors anything.

The theory is that if you die in the next 10-15 years, your survivors will get the life insurance payout. If you don't die then, your higher pension payout will more than offset the cost of the life insurance policy, and also provide higher income, compared to taking the lower pension that provides for a survivor's benefit.

Of course, it all depends on what a particular life insurance policy would cost for you, given your health conditions.

[MasterBlaster]

If your plan is like many of them...

The quotes you have are for todays interest rate environment. Should the underlying interest rate index change for your plan in the next four years the following will happen.

Should rates go up. The lump sum options go down in value (perhaps alot)and the joint annuity options go up in payment amounts somewhat. The single life annuity amounts just may stay relatively constant.

Should rates go down the reverse is true.

I suspect that all of the quotes are actuarily equivalent given the interest rate index and the mortality model used by the pension.

These things are not as easily computable as one would think.

To get you started take a look at the lump sum value calculator (under the calculators tab) at the "Pension Benefits" company website:

http://www.pensionbenefits.com/calcu...em=lumpsum_cal

you'll need the exact interest rate and mortality table used by your pension plan