Post by Admin/YBB on Dec 21, 2020 18:50:17 GMT -6
ANNUITIES & PENSIONS. Annuities can be bought from insurance companies. Types range from basic IMMEDIATE-ANNUITIES to fancy guaranteed minimum withdrawal benefit [GMWB] annuities. They may be for specified terms or lifetime, immediate- or deferred- income, with fixed or variable rate, equity-linked, variable-annuities [that invest in funds], accumulating or decumulating, etc. Remember that annuities with more bells & whistles are more expensive [& more profitable for the insurance companies]. Some annuity prospectuses may run 100-200 pages. Most workplace 403b plans & several 401k plans also offer ANNUITIZATION options. Qualified longevity annuity contracts [QLACs] are allowed for limited amounts from IRA/401k/403b; these are deferred-income annuities & the amounts used are exempt from RMDs.
On retirement, people may face a LUMP-SUM or PENSION decision; partial lump-sum & pensions may be available, but some have only all-or-none options. These should be evaluated case-by-case. Generally, pensions offered tend to be more generous than what one can buy on own in the commercial annuity market. This is because many companies really want retirees off their books. Offering lump-sum buyouts to existing retirees is now illegal except in special situations. A future post will discuss #SocialSecurity, an important inflation-adjusted “pension” that most Americans have.
There are considerations for #DIYinvestors: 1) Whether they can invest better on their own; some can, others cannot, 2) heirs, as most lifetime annuities or pensions end with life [although there are survivor benefits for reduced payments]. Also, people in poor health should not use annuities/pensions. #PersonalFinance 12/6/20.
On retirement, people may face a LUMP-SUM or PENSION decision; partial lump-sum & pensions may be available, but some have only all-or-none options. These should be evaluated case-by-case. Generally, pensions offered tend to be more generous than what one can buy on own in the commercial annuity market. This is because many companies really want retirees off their books. Offering lump-sum buyouts to existing retirees is now illegal except in special situations. A future post will discuss #SocialSecurity, an important inflation-adjusted “pension” that most Americans have.
There are considerations for #DIYinvestors: 1) Whether they can invest better on their own; some can, others cannot, 2) heirs, as most lifetime annuities or pensions end with life [although there are survivor benefits for reduced payments]. Also, people in poor health should not use annuities/pensions. #PersonalFinance 12/6/20.
