Accounting, Payroll & Pension Issues/Pension - annuity
Hi Tony -
I'm eligible for a company pension at age 65, and need to answer several questions for them to process the paperwork:
1. Do I want to name a contingent annuitant? I'll be 65, and my domestic partner is 62. A 50% contingent annuity would reduce my payout by about 10%. There are a number of ways to look at this, could be seen as (somewhat expensive) life insurance? Any thoughts on this, or is there a web site that reviews the pros and cons?
2. Need to decide whether I want Period Certain payout. Same question about your thoughts and web site.
3. Do I want to defer the pension past my eligibility date. Can't think of any reason why I'd want to do this.
Thanks for your help!
Lets take these one at a time.
1) One pension maximization strategy we employ at the firm is to review pension payout differences and try to determine weather or not it would be cheaper to just take the original payout for max value and use the difference you would have lost on a contingent annuitant to actually buy a whole life insurance policy that would payout on the death of the annuitant. If the numbers work, they typically work well better than the "expensive life insurance" option offered through the pension plan. Of course there are many factors involved in this process: insurability, health, lifestyle etc all play a factor.
I would recommend coming to a number in life insurance death benefit that seems to beat the contingent annuitant arrangement on an annuitized payout and see if a policy would work through a trusted local agent. If the numbers do not fit for this pension maximization strategy, I would look at the numbers that work best for you and your partner. Unfortunately, other than a time value of money calculation there really is not a website that would give you numbers to fit your specific lifestyle. I would seek out a qualified retirement plan oriented financial adviser for assistance in determining what would make the most sense for you and your family.
2) Once again, I would review my entire financial situation with a local trusted adviser, as it is very difficult to say one way or another without knowing your overall financial health and portfolio.
3) The only way this would make sense is if you can delay the payout and receive higher compensation for waiting. Many people will do this to gain higher annual social security amounts when they do not need the compensation to live at 62. Once again though, everyone's personal situation is different and this should be looked at in accordance with your trusted advisers and your personal situation.
Hopefully, I gave you a couple of ideas and helped a bit. Please let me know if there is anything else I can be of assistance with.