The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: Pension - lump sum or annuity? Date:  4/24/2014  1:53 PM
Author:  Hawkwin Number:  74837 of 100451

The issue with a single life annuity is that once I die, the payments stop.

Is that your only option? You mentioned other options so you might have the choice of Period Certain that will ensure any remaining payments are paid to your estate or a beneficiary.

Playing with excel tables, and I don't know if this is a coincidence or not, it seems like the two choices even out if I live out my life expectancy, invest the lump sum or annuity payments, and assume a 7% return on those investments for the same period. If I assume a 10% return, the lump sum choice seems better. If I assume a 4% return, the annuity seems better.

I take it you don't either need or want the income? Have you considered the fact that if you rollover the lump sum, that you would still have to take required distributions starting at age 70 1/2 of 3.5% and increasing every year? Those distributions (when taxes are considered) make it difficult to do a normal excel calculation - and I am not immediately aware of a calculator that will easily consider a comparison of the two with RMD added in. There is probably one out there if you search hard enough.
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us