Accounting, Payroll & Pension Issues/Pension - annuity
Hi Allen -
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!
There are no black and white answers to your questions. Also, I do not know of any website that will give you the answers.
The intention is to make all the options "actuarially equivalent". That means if a large number of people were given the options, on average the plan would pay out the same amount of money under each option. The answer for any one individual depends on estimating how long he/she will live and how important it is to provide a pension to someone else when he/she dies.
As far as question #1, most plans require the contingent annuitant to be married to the participant. Check with the plan administrator if you can name a domestic partner. If you can and your partner does not have his or her own sources of money, it is, in my opinion, a good idea to take the contingent annuitant option. Obviously, the answer for you depends on whether or not you can elect a contingent annuity and, if you can, do you want to provide this benefit for your partner.
As far as question 2, the answer is similar. Do you want to make certain the plan pays out payments for a period of years?
With respect to question 3, the answer depends on what sort of increase you will receive if you delay benefits. If it's small (approx. 6% or less per year), you definitely do not want to delay. If it's larger, you are in good health and feel you will live for many years and you do not need the income immediately, it may pay to defer.
Sorry, I can't give you simple answers. Good luck with whatever you decide and don't look back on your decision.