Your pension when the unexpected happens
What if a former employer offers a lump sum?
Retirees who are already collecting a pension check have been getting these buyout offers lately.
The Pension Protection Act of 2006 and the Moving Ahead for Progress in the 21st Century Act combine to make it very attractive for companies to persuade you to accept a lump sum rather than an annuity. These laws also say you don't have to accept the offer. You can continue to opt for the annuity.
Making the decision isn't a slam-dunk, says Leon LaBrecque, an attorney and financial adviser who has worked with hundreds of Ford Motor and General Motors retirees offered these deals.
LaBrecque says you should ask yourself these questions if you are offered a buyout.
- How healthy am I? How healthy is my spouse?
- What kinds of retirement income will I have? Will my spouse have a significant pension?
- How important is it for me to leave money to my children or a charity?
- Is it important to be able to have flexibility in the amount I withdraw?
- Will I manage my own money or delegate investment management to someone else?
- What kinds of financial obligations will I have after I retire?
- What will be my tax bracket after age 70 ½?
- What is my risk tolerance?