If there are no benefits linked to your pension other than the payments, the decision between taking the annuity or cashing out will depend a lot on your view of the future. One quick check is to see how much joint annuity you and your wife can buy for $125,000. Just go to Vanguard and get a quote. The insurance company (annuity underwriter) is likely a similar or better credit than your employer. Another approach is to realize that if you believe in Firecalc and the 4% rule, your $125,000 should give you $5000 annually, fully indexed for inflation. But IMO there is a lot of Kentucky windage in this figure. If you are worried about inflation you can discover what sort of indexed joint annuity you and your wife might buy for the $125,000. Lastly, I think TIPS are about 2 3/8 real now, so TIPS should give you a little less than $3000 per year, and you or your heirs will keep the inflation indexed principle.
A lot depends on your need for current cash, your ability or lack thereof to delay SS payments, and maybe most of all your expectations for inflation rates going forward.
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