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Options when the government takes over your pension

A pension administered by the Pension Benefit Guaranty Corporation (PBGC) is much like a corporate pension. A retiree can choose from a variety of options to receive benefits. They include:

1) A straight-life annuity that gives a retiree a fixed monthly benefit for the retiree's lifetime. This has the largest monthly payout, but does not include a survivor benefit.

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2) A five-year, 10-year or 15-year certain-and-continuous annuity. Like the straight-life annuity, this provides you with a monthly benefit for the remainder of your life. If you die before the period you select is over, then your designated beneficiary will receive the same monthly payout for the remainder of the period. If you die after the end of the period, then the benefit payments end upon your death and your beneficiary receives nothing.

3) A joint-and-survivor annuity provides a retiree with fixed monthly benefit payments and upon the retiree's death, continues payments to the retiree's spouse or other designated beneficiary for the rest of his or her life. The monthly benefit your spouse or other beneficiary receives is 50 percent, 75 percent or 100 percent (you choose the percentage) of the amount you were receiving while you were alive. The higher the percentage you opt to give your spouse after your death, the smaller your pension will be.

4) A joint-and-50 percent survivor "pop-up" annuity is similar to the joint-and-survivor annuity described above except that if your spouse dies before you, your monthly benefit "pops-up" to the straight life annuity amount for the rest of your life.

Jenny C. McCune is a contributing editor based in Montana.

-- Posted: Jan. 3, 2005
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See Also
Main: How safe is your pension?
How healthy is your company's pension plan?
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Investing glossary
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