4 ways to withdraw your retirement money: which one to choose?

If you are lucky enough to have a pension from an employer, it makes sense to get the maximum benefit from it. And one way to do that is to select the best payment option for you and your family.

Lump sum

Take a lump sum means that you will receive a large sum of money as soon as you retire – and that is the end of your pension. The lump sum option gives you maximum control over your money, as you can then decide what to do with it instead of leaving the retired attendants to manage it for you. Unfortunately, retirees who choose this option tend to spend too much money, leaving them without sufficient funds later in retirement. So if you choose the lump sum option, roll it into an IRA or other retirement account, rather than slipping it into a standard brokerage or bank account. This will help you remember to keep your sticky little fingers away from the money that is supposed to last a lifetime.

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Single life annuity

If you do not receive a lump sum payment, you will receive a form of annuity rather. An annuity is a product that pays you over time, although different annuities define their payments in different ways. Most pensions will pay you some form of fixed annuity, which means that whatever payment option you choose, the payments you receive will be exactly the same each month.

The single life annuity is the simplest type of retirement annuity. It typically provides the highest monthly payments of any annuity option, but as soon as you die, the payments stop coming – even if you die immediately after purchasing the annuity. It could leave your family in dire financial straits if they don’t have other sources of income.

Reversible annuity

A joint life annuity offers you a way to protect your family after you leave. This annuity pays you for as long as you live, then continues to make payments to the beneficiary of your choice (usually a spouse) throughout their lifetime. Most joint and survivor annuities allow you to choose the percentage of your lifetime payments that your beneficiary will receive; options generally range from 50% to 100%. Of course, the higher the percentage you select, the smaller your basic monthly payment will be. It’s best to look at all the results produced by the various options and choose the one that will maximize your lifetime payment while ensuring that your family will have enough income from your survivor benefits to do without you.

Fixed-term annuity

While the Joint Survivor Payout Option maintains payments in both your life and that of your beneficiary, the Fixed Term Option continues to pay until your death plus a number of years thereafter. . The payment period options for your beneficiary typically range from five to 20 years. Since the number of payments your beneficiary will receive is limited under this payment option, you will typically end up with a lower monthly payment than the single life option, but higher than the joint and survivor option.

Choosing the right pension payment

For most retirees, an annuity of some type is a better choice than a lump sum payment. Annuities provide a fixed, guaranteed source of income for at least your life and possibly beyond, which can save your life if something bad happens to your investments. retirement savings accounts. A retirement annuity, when combined with your Social Security benefits, can be enough income to ensure that you will always have enough to live on, no matter what.

Single life annuities make the most sense for a single person with no minor children or whose family has abundant income from other sources. A single life annuity can also be a good choice for a healthy retiree who expects a long retirement. Joint life annuities and survivor annuities offer the best protection for your spouse or other beneficiary, while fixed-term annuities may be the best option if you don’t have a dependent spouse but want to make sure that your children will have a source of income in the years following your death.

Before deciding which pension payment option to choose, be sure to consult with your spouse and possibly your children as well. It’s a decision that will affect them as well as you do, so it’s fair to hear them at least before you decide how you want to claim your money.