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2) To have the pension continue for the spouse after the retiree died you had to take a significant reduction in benefits. If you guessed wrong about which spouse would die first then you lost a lot of the benefits that you could have had. (There were some limited situations where a death soon after the decision was made would cause an adjustment to be made.) Lump sum distributions were also a gamble.

Actually, the hit isn't so bad. I take a 23 % hit on my pension to ensure that my surviving spouse who is 5 years younger than me gets the same pension amount.

Second, if we calculate the amount necessary to fund the amount in my pension at 4% a year (the amount per year calculated to not run out of money.) I'm looking at $18500 a year which would require $462,000 in an 401K or IRA to fund.

Third, I don't depend entirely on my pension. I currently have $418,000 in my and my wife's 401K plus my inflation protected IRA. When we were given the option to convert our tradition pension to a non-annuity type pension, it turned out that it would take 22 years to make up the difference between the two.

A no brainer. Traditional pensions do pay better than non-annuity pensions.

Don't forget, once you make 65 you don't have that many years to spend your money.


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