Pension – Annuity or Traditional IRA?
I am retiring in one month and need to make a decision on whether to rollover $68k Pension into a traditional IRA, or roll into my company 401k(which I will roll over at some point) or take the annuity of $496 per month. I get conflicting advice on annuities vs. rollovers. I want to avoid taxes as I am earning a good salary right now (before retirement salary)
Terry Says
All of the above options give you the chance to defer taxes until you take the money out of your eventual vehicle. But the REAL question here is whether that $496/month is a good “deal.” One way to find out is to go to www.immediateannuities.com There you can input your age, gender and the amount of money (the amount of the “lump sum”) you would be investing. That will let you know the amount of money you could get from other highly-rated insurance companies each month.
But that isn’t the only issue with choosing the annuity. This is a choice that locks you into a fixed monthly payment for life. At only 3% inflation, the value (spending power) of the money will be cut in half in 25 years! It’s hard to advise without knowing your other investments, but you really need to have at least some of your money invested in equities, and another portion liquid for withdrawals. Locking into this annuity doesn’t seem to be such a smart idea on the face of it.
