Should I invest my lump-sum payout in an annuity?
- What is a pension?
- Do I have to do anything to manage my pension?
- What if I leave my company before I retire?
- How does vesting work?
- When can I access my pension money?
- Can I take out a loan from my pension plan?
- Should I take a lump-sum payout or monthly payments?
- What are the advantages of taking a lump sum?
- Should I invest my lump-sum payout in an annuity?
- What's the difference between a single-life annuity and a joint-and-survivor annuity?
- Will I pay tax on my pension payouts?
- How should my pension affect my retirement planning?
- Will having a public-sector pension affect my Social Security?
You can certainly take a lump-sum payout, roll it into an IRA, and then use a portion of that IRA to buy something called an "immediate annuity" from an insurance company. Don't confuse this type of annuity with the ones people use as tax-deferred investments.
An immediate annuity is a vehicle designed to start paying you a guaranteed income as soon as you invest your money. In effect, you've created the same sort of income stream that you would have had by choosing monthly payouts from your pension.
The advantage to this arrangement is that you get the security of a monthly check, plus a stash of money that can keep pace with inflation and help out with occasional unexpected expenses (or fund the occasional indulgence, like a cruise).
