I went to a retirement information session yesterday; I'm a pubic employee and there is an opportunity at retirement to annuitize the funds in my 403B (sort of like a 401K) account. This isn't one of those annuities that costs money up front to do, sold by insurance companies. I'm trying to figure out the pros and cons. Any thoughts?
And unfortunately, retirement plans won't be the only financial assets that are vulnerable. Efforts have already been made to cut SS. My whopping $4 raise this year went entirely to an increased Medicare premium.
Looks like I'll be getting out my dress shoes and clothes whether I want to or not. Or maybe I can sell produce at an organic market.
My experience is that the delayed period of withdrawal w/o penalty can be problematic. An aggressive banker sold my parents an annuity (w/o my knowledge) when they were in their late 70's. Payout w/o penalty wouldn't have been possible for some years (I don't recall how long).
I don't recall specifically but I believe that the payout period was beyond my mother's lifetime, and on her death, we cashed it out and got rid of it. I don't recall if there were penalties. And all those tax records are in my tax storage files now.
I would be very concerned about that issue - when could the funds be withdrawn w/o penalties?
My sister was a state employee and had a retirement fund as well; I just don't remember all the details 13 years later. When she retired in her mid-50's, she chose an option to take the funds on a regular basis, with no reservation for heirs. That wasn't a problem, but the fact that she had contributed for almost 30 years, and on her death less than a year later, she had only received pension funds for about 3/4 of a year was sad.
So all those funds and matching funds weren't available for maintenance of her house until disposition. What was available was another pension plan she had, perhaps a 457 (I just don't remember), which was configured for the heirs. I used my share to pay expenses of her home; my brother declined to contribute, so I bore the burden from my own inheritance.
That possibility is something to consider, especially since I know you plan ahead for your own longevity.
As to who to consult, I think I'd consult a variety of different retirement planners, including but not limited to an estate planner and a financial pro. There are a lot of so-called experts in retirement planning in our area who sponsor free meals and so-called retirement advice. The free dinners interest me; their sales pitches don't because I know they're going to try to sell retirement products that benefit them, not me.
I feel very fortunate. We may be the last generation to see much in the way of pensions given the way politicians and the global economy have abandoned the working and middle class. And IMO the swamp is getting filled with critters who will make it decidedly worse.
The lifetime payment option (without buying an annuity) has a couple of advantages. One is that if you die early, you can pass on the remaining balance. That doesn't happen with an annuity, except if you buy an annuity with a survivor option, but that costs you a reduction in your monthly lifetime payment. The second is that you can accelerate payments if you have an unexpected need or expense, or take out a chunk and then go back to a (usually smaller) monthly payment.
The big advantage to a purchased annuity is that if you outlive your life expectancy, it keeps paying and the amount is not reduced. By contrast, with monthly payments from an account, either the account will run out or the payments will need to decrease as you get older (such as by refiguring your life expectancy every year) to avoid running the account to zero. That's essentially what you're paying for when you buy an annuity (apart from the investment fees, which you would pay anyway).
I hope this makes sense.
Questions onyour 403b --- how long can you defer taking any withdrawals? What are the payout choices? Are you married? Are there payout choices based upon a joint option (for you and your partner?).
No one can tell you what to do until you know what you will need. How do you plan to spend your retirement? Sitting close to home or traveling the world? Cooking an unhurried meal at home or dining at Peter Luger's?
What are ALL of the options with the 403b?? Can you take it all at one time (BIG tax consequences)? Can you wait until you are 70 to make a decision and allow it to grow between now and then?
The good news is 'you have retirement plans'. You have choices. Don't drive yourself nuts, don't listen to other teachers. Everyone is in a different place. Living in a rental apt vs. living in a house/condo that is fully paid off. A traveler vs someone who prefers to stay nearer to home. Would you prefer to sit on the boardwalk at Coney Island or have tickets to a broadway show? What is your family situation? Hope this helps rather than making things worse! LOL
I would start researching on line by looking at sites and info that is not sponsored by the various institutions pitching these things.
I have a pension/annuity through my Union retirement plan. It was developed and is administered by a joint trustee board of union and employer members. It is a simple contribution, investment, payout plan and I have no problems with this set up. I do not have to worry about investments or any of the mechanics of the plan.
Some sales guy got hold of my dad when his dementia was starting and sold him 8 complex annuities, different terms, beneficiarys, maturity dates and tax regs. It was a nightmare to nail this company down for the paperwork.