Episode 150: Lump Sum or Annuity: What’s Right for You?

In this episode of 'Retire with Style', Wade and Alex discuss the complexities of pension decisions with Jason Rizkallah from McLean Asset Management. The conversation delves into the critical choices retirees face regarding pension options, including whether to take a lump sum or annuity payment, the implications of each choice, the importance of comprehensive financial planning, and the potential benefits of external annuities. They discuss the importance of evaluating commercial annuities, understanding the structures and benefits of different annuity options, and the credit risks associated with pensions and insurance companies. The conversation also covers strategies for diversification, the significance of rate lock procedures, and the impact of income decisions on overall retirement planning. Listen now to learn more!

Takeaways

• Annuities provide reliable income but come with liquidity issues.


• Tax implications are significant when taking a lump sum.


• External annuities can be competitive with pension options.


• Comprehensive financial planning is essential for retirement success.


• The choice between lump sum and annuity should consider long-term goals.


• Market conditions can affect the competitiveness of annuities. Consider all options before deciding on a pension or lump sum.


• Commercial annuities may offer better income rates than pensions.


• Evaluate the structure of annuities for survivor benefits.


• Credit risk varies between pensions and insurance companies.


• Diversifying annuities can mitigate risk but may lower income.


• Rate lock procedures are crucial in securing favorable annuity rates.


• Understand the implications of income on Medicare premiums.


• Ask providers about the potential repercussions of retirement choices.


• Partial rollovers may be possible but are often all or nothing.

Chapters

00:00 Introduction to Pension Decisions

02:35 Understanding Pension Options: Lump Sum vs. Annuity

05:54 Exploring the Third Option: External Annuities

08:51 Pros and Cons of Taking a Lump Sum

16:17 Evaluating Annuity Options

25:49 The Case for External Annuities

27:23 Evaluating Pension vs. Lump Sum Options

30:53 Understanding Annuity Structures and Benefits

34:34 Assessing Credit Risks in Pensions and Annuities

38:18 Exploring Partial Rollovers and Diversification Strategies

42:09 Navigating Rate Lock Procedures for Annuities

47:11 Considering the Impact of Income on Retirement Planning

Links

Click here to download Retirement Researcher's free flowchart resource, "Should I take my pension as a lump sum?": https://retirement-researcher.ontralink.com/tl/474

We’re hosting another YouTube LIVE Q&A episode for RWS! Click here to submit your questions: www.retirementresearcher.com/ask

The Retirement Planning Guidebook: 2nd Edition has just been updated for 2024! Visit your preferred book retailer or simply click here to order your copy today: https://www.wadepfau.com/books/ 

This episode is sponsored by McLean Asset Management. Visit https://www.mcleanam.com/retirement-income-planning-llm/ to download McLean’s free eBook, “Retirement Income Planning”