With an annuity, you’ll receive a set monthly income until either “your benefits are exhausted, or you pass away.” If you have a single life annuity, then these benefits cease when you pass.
The pension fund will also retain any unused benefits. With a joint-and-survivor annuity, however, your spouse will continue to receive a portion of your benefits.
In a lump-sum annuity, the benefits are paid out in a single payment. While an annuity will provide you with a regular income, the lump sum lets you maintain control of your money. The control means you can invest elsewhere or transfer it to others.
Keep in mind that there are tax implications to consider in all withdrawal of any funds — in any pension plan.
“While most pension plans are secure and well managed, they are not completely bulletproof,” states MoneyTips. “Defined Benefit plans are of special concern because if the company or governmental entity goes bankrupt, future benefit payouts may be reduced or lost entirely (for a painful history lesson, read about the ‘Enron pension funds’).”
If you need some peace of mind, though, know that “Private company Defined Benefit plans are at least partially protected by the Pension Benefit Guaranty Corporation (PBGC). The PBGC “was created by the Employee Retirement Income Security Act (ERISA).”
Public pension plans, on the other hand, should be guaranteed by state law. But, “with huge funding shortfalls, these guarantee laws are increasingly under fire.”
- What is a pension plan?
- How does a Pension Plan Work?
- How a pension works
- The Move to Defined-Contributions
- Are pensions taxable?
- The Difference Between a Pension and a 401(k)
- The History of the Pension Plan
- The Link Between Your Pension and Your Job
- How to Find Old 401(k) and Pension Accounts
- Vesting Your Pension Funds
- It’s SEP to You
- Do You Really Need a Pension?
- How Much Should You Contribute to Your Pension Plan?
- How Much are You Allowed to Contribute a Pension Plan?
- Where’s My Money?
- Calculating the Value of Your Retirement Fund
- Common Causes of Errors in Pension Calculation
- Can I Tap My Pension Plan Early?
- Monthly Annuity or Lump Sum?
- Are There Any Risks Involved With Pensions?
- What Happens With My Pension When I Retire?
- What Happens to Your Pension if You Die?
- Can You Have a Pension and 401(k) and IRA?
- Final Retirement Tips