Pension-Life Annuity or 10 yr Certain?

Question

Which pension should I choose?
I'm 60...
option 1 get $1700 monthly for life, stops at death
option 2 get $1625 monthly for life w/a 10yr guarantee. If I die b4 10 yrs, beneficiaries get balance.
Any thoughts would be appreciated.

Answer 1

Option 1 is straight-life annuity. Only you receive the life time payments and no one else will get it when you die. This is great if you are single and no one is dependent on you such as kids.

Option 2 is life annuity with period certain. This means if you die during the period, the beneficiary will receive payments until the end of the period. If you outlive the period, it will still continue to pay you for life, but no one else will get the money if you die.

There should be a third option called "Joint and Survivor Annuity." This is where you get paid for life and if you die, it will continue to pay to your beneficiary (about 50% of what you get each month) until the beneficiary dies. This is the smallest monthly payment option of all three.

Answer 2

Life Annuity Definition

Answer 3

10 Year Certain And Life Annuity

Answer 4

This Site Might Help You.

RE:
Pension-Life Annuity or 10 yr Certain?
Which pension should I choose?
I'm 60...
option 1 get $1700 monthly for life, stops at death
option 2 get $1625 monthly for life w/a 10yr guarantee. If I die b4 10 yrs, beneficiaries get balance.
Any thoughts would be appreciated.

Answer 5

I have a wife and two children to provide for, so for me it's clear that the reduced payment with a ten year guarantee is better. But I might make the same choice even with no heirs. There are a lot of worthy causes that could use the money if I die prematurely, and to me it would be aggravating to think that I might only get a couple of months of payments on a pension I worked decades to achieve.

Most of these reduced-payment options have the same present value based on the actuarial tables, so it's really just a choice of what works best for you. One important thing to consider is how much you'll have to pinch pennies to get by on $75 less per month.

Answer 6

Option # 1 without question! Your part of a very lucky few i am 52 and had more than my share of hard knocks! For me there is no such reality of retirement or pension! And i have aggressively sought opportunity with little to no success! Started a newspaper & T.V. guide route at age 8 never stopped working until floods of immigrants saturated our jobs! Never have had any job security along the way. Not everyone can go to college for many reasons! I failed cause of funds & i had the worthless G.I bill and still worked while sleeping in my vehicle!

Answer 7

If it were me I would choose option 2. You probably will not notice $75 per month. None of us is getting any younger. A lot can happen in the next ten years. The $75 per month buys you peace of mind.

I know I sound like a life insurance salesman, but I am not.

What you do not mention is if you have dependents which rely on your retirement income to survive. If not maybe you want the $75 per month for yourself.

Answer 8

The answer depends entirely on whether or not you have a need to leave a residual estate to others. If you do, and you don't have any other arrangements, then Option 2.

Otherwise, Option 1 is clearly superior.

Answer 9

Do you have a wife? or dependant kids, If so
Take 10 year guarantee, because it will pay you forever if you live that long, but will pay your dependants for 10 years if you drop dead tomorrow.

If you have no dependants , take the $1700 for life.

Answer 10

Take the $1700 a month for life.