No. of Recommendations: 2

<< My defined benefits pension plan is terminating and offering a 52 year old the following options:1. Lump sum distribution to my IRA of $121,170, 2. $673 per month annuity now, 3. $912 per month annuity at age 55 or 4. $1900 per month annuity at age 66. I have a 401 K and an IRA already active. Which option makes the most sense since I do not plan to retire for at least ten years and what type of investment would be prudent for someone who is an average risk taker? >>

Another factor here to consider

If you roll over the pension to an IRA, the money is yours, and if you die, your heirs will inherit it. If you decide to wait until 55 or 65, and get run over by a truck, no one will collect a dime if you are single. For some, the ability to have the money to pass on to kids is a factor.

If you are married, there are further complications. If you have a spouse you want to cover (in the event of your death before hers), either you take a lesser amount for a 'joint life expectancy' annuity, ie, less per month, but guaranteed at some level (usually less) to provide income to a spouse if you should die. If you don't take the 'joint life expectancy annuity', which may require your spouse's approval to do so (written), then if you die, the money stops. If you die at 66, and start collecting at 65, spouse is without that income source.

Other factors...your company could go bust. It's happened to many, from airlines, to steel companies, to computer companies. While your pension is supposedly guaranteed, it is only guaranteed by the Pension Guarantee board up to about $50K/yr pension.

Of course, if the economy changes radically, you could become unemployed...not make it to 65....right now you have many eggs in one basket.

If you intend to work, taking an annuity right now just maximizes the amount of income tax you'll pay, and it will be at the highest marginal rate (ie, on top of your salary).

Lots to consider.

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