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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76397  
Subject: Re: Pension Termination Date: 2/2/2004 12:14 PM
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A few points to consider;

1) You should double check into how they calculated the cash value of your pension. There are a lot of assumptions about things like rates of return and life expectancy. Companies have been known to push the limits of what is valid. I recall reading about a company that would audit this for you and only get paid a percentage of any increase that they could convince the company to change your pension by. (Sorry, I don't remember the name of the company)

2) Now is a time of very low inflation and interest rates. With both of these being so low it is generally thought to be a risky time to lock long-term money into fixed rate investments. Most annuities are essentially fixed investments so I would be wary of them right now. Just like a 30-year bond their relative value will be clobbered if inflation and interest rates go up even moderately.

3) Take a hard look at the quality of the company that will be responsible for the annuity. Even if they look good now they may go downhill in the next 40 years or some other company could buy them out.

4) The IRA will be more flexible if you should need to involuntarily retire early if your company is sold or you get laid off or you have health problems. Getting rid of the traditional pension would make your company look better to a potential buyer. It would be the pits if you found yourself out of a job in your mid 50's but your annuity doesn't start for another ten years.

5) You may not be forced to decide to put all of you money into just one of the options. You should be able to put half of it in an IRA and half into an annuity if you want to. Ask if this is possible in writing. This is a reasonable request. Your HR department is likely a bit paranoid (and rightly so) about being held legally responsible for forcing you to make a bad choice. Even if they hadn't originally set it up for you to take multiple choices it will likely be much easier for them to accommodate you than to tell that you are that you are forced to do something.

Greg
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