I like the advice that I’ve seen posted here and now that I have a decision of my own to make I’m throwing my situation out for a response.This April I turn 65 and an Optional Purchase Payment Individual Retirement Annuity which I have matures. The Annuity Company is giving me three main options.Payment Option 1: A Life Annuity with no certain period would provide me with a monthly income of $140. However, under this option all payments would stop with my death, even if it occurred after only one payment.Payment Option 2: A Life Annuity with 120 certain payments would provide a monthly income of $131. This option provides a monthly income as long as I live. In addition, if I die before I have received all 120 payments, I can designate that the remaining payments which will continue to be made to my beneficiary on a monthly basis.Payment Option 3: By electing to surrender my contract I will receive a one-sum payment equaling a cash value of $20,877. There are no fees but I am told that it will be taxed as ordinary income. I can also elect to change the annuity date to any date which occurs before Oct 2017 which is when I would have reached the age of 70 1/2. I don’t know if there are any risks with doing that but it would buy me more time to take action.I retired in 2011 with an annual pension of $37K. My wife and I will draw approximately $33K combined social security in 2012. Since we don’t work now we will not have regular income in 2012. I could use a way to reduce my 2011 taxes since it is composed of a lump sum severance payment, pension, and Soc. Sec. I really don’t want to annuitize this IRA but I just don’t want to get beat up on this unnecessarily tax-wise since I contributed most of the money that is in this plan. Any thoughts are welcome. Thanks.
This April I turn 65 and an Optional Purchase Payment Individual Retirement Annuity which I have matures. Is this an Individual Retirement Annuity as described on page 9 of Pub 590, or is that just a product name?PhilRule Your Retirement Home Fool
PhilI can't answer your question directly at this time but I can say from the wording in my Pruco contract as issued in 1982 that it was issued as an Individual Retirement Annuity (IRA) within the meaning of Section 408 (b) of IRS Code of 1954 as amended. In 2005 I received an endorsement which reflected key Internal Revenue Code provisions applicable to tax-qualifies IRAs, as modified by the economic growth and Tax Relief Reconciliation Act. Thanks.snazzman
http://www.ssa.gov/OACT/STATS/table4c6.html says you will live 17 plus years if you are average.The 120 times 131 gives you 15720 which says take the lump sum, BUT I really don't think you have all the info needed to make a rational decision. Using T-Value the 131 for 120 is a negative 5+%.You might try a couple of the insurance sites (Berkshire Hathaway, NewYork Life etc) toget an idea of what is available to purchase with the lump sum.
I can say from the wording in my Pruco contract as issued in 1982 that it was issued as an Individual Retirement Annuity (IRA) within the meaning of Section 408 (b) of IRS Code of 1954 as amended.Thanks. As I read the regulations, you should be able to roll the proceeds into a self-directed traditional IRA with no tax consequence. Have you considered that?PhilRule Your Retirement Home Fool
bookie71, Thanks for the feedback. I'll be checking it out. snazzman
Phil,I was leaning in that direction but looking for an endorsement from people more familiar with tax law such as yourself before putting a plan in motion to obtain the necessary forms from my credit union to arrange for a rollover of my IRA annuity into a self directed traditional term IRA. I'm also looking forward to more restful nights. Thanks again for your input.snazzman
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