Distributions from Your Retirement Plan

Advantages and Disadvantages of Taking an Annuity

Advantages

  • Fixed monthly income for life and the security of knowing that payments will continue on a regular basis.
  • You don't have to actively manage your pension amount.
  • Option of spreading the payments out over your spouse's lifetime as well as your own.
  • Confidence in knowing you can't outlive your pension.

Disadvantages

  • Once you start to receive an annuity, you can't elect a lump-sum distribution.
  • If you select an annuity today, you will be unable to take advantage of interest rate increases, since you have a fixed monthly payment.
  • If you die prior to your life expectancy, you and your beneficiary, if applicable, may not collect the full value of your accrued benefit. For example, suppose at retirement your spouse waives his or her right to your pension, and you choose a life annuity. Assume you live for only one year and then die. Your beneficiary will not receive payments, since you chose the life annuity option.

Before accepting an annuity form of payout from your retirement plan, compare it with the benefits you would receive by rolling over a lump-sum distribution into an annuity purchased from an insurance company.

Share Article:
Add to GooglePlus

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Heartland Bank and Heartland Planning Associates are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Heartland Planning Associates, and may also be employees of Heartland Bank. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Heartland Bank and Heartland Planning Associates.  Securities and insurance offered through LPL or its affiliates are:

Not Insured by FDIC or Any Other
Government Agency
Not Bank
Guaranteed
Not Bank Deposits or
Obligations
May Lose
Value

 

The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

BrokerCheck