Smart Management of Retirement Income—Selecting Payout Methods

One big change that retirement brings is you begin to take income from your defined benefit pension or defined contribution plan. You have to consider various payout methods, or the ways in which the income will come to you. The right alternative for you, or you and your spouse if you’re married, depends on a variety of factors such as your other sources of income, your comfort level with investment risk and even your health.

 

When you retire from an organization that offers a pension, you generally have at least two options:

  • taking a pension annuity and receiving a monthly check; or
  • taking a lump-sum distribution, which you will need to invest or roll over to an IRA—and manage to ensure a secure retirement.

 

Pension Payout Checklist

Many people wait until they are almost ready to retire before they start thinking about payout options. You may want to start planning earlier. Here's a checklist of questions to get you started:
 Green CheckmarkIs your health good enough to have a reasonable expectation of a long retirement? How about your spouse’s health?
 Green CheckmarkDoes your spouse have enough retirement income so that it would benefit you to select a single life annuity with a period certain for your payout? If so, how long should that period certain be?
 Green CheckmarkAre you concerned about the long-term financial health of your employer, so that taking a lump-sum payout, if available, might make sense?

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