Q: My company had a pension plan which they froze a few years back. Now they are terminating the plan. We will get a choice of either a one time pay out or the opportunity to buy an annuity. I have heard bad things in the past about annuities, so I am wondering what you think I should do?
A: The answer depends on both the tangible dollars, as well as a few intangibles like your investment horizon and overall assets for retirement.
Your company will give you a proposal stating both options in print (if they haven’t already).
Once you get it, forward it to me and let’s walk through it considering both sides of the equation. We offer a free consultation.
In the interim, if you want to calculate the yield on the annuity and compare that to the yield of alternate investment options…
Take the proposed monthly annuity payment option and multiply it by 12.
Then divide that number by the proposed lump sum option.
This will give you the % yield of the annuity option.