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When faced with a similar choice a few years ago I chose the lump sum rolled over into an IRA and have not been sorry. This gives you choices of what to do with the money and may provide an opportunity to convert part of it to a Roth IRA at some time in the future.

However the lump sum offer is only 85% of the current total of my pension.

This provision bothers me a bit, but, I am wondering how it is calculated. This is 85% of what?

One way of getting a first order of magnitude of the annuity is to calculate what its payments are as a percentage of the lump sum amount. Although this is definitely not a bond it expresses its income stream as if it were a bond. It's not a bond because if you die it completely goes away.

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