You may be intimidated by the size of the lump sum distribution and consider taking the annuity, but the better financial advice would be to take the lump sum distribution.
When you ask around, more people claim they would take the lump sum because they believe that they can do better investing on their own ( and this is what they have done historically in Arizona).
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With a stretch IRA, the beneficiary does not take out the monies in a lump sum, but can withdraw money in small increments over his or her lifetime.
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In my previous blog post, I discussed the rules and restrictions that employees should be aware of when evaluating early retirement and the opportunity to take a lump sum pension.
You can usually take some of the fund as a lump sum but the rest must normally be used to buy an annuity.
Now here's the real problem: To use averaging, you must take the entire balance in an account as a taxable lump sum.
"If I were a plan participant and I was planning to take a lump sum, I would pick up the phone and call H-R and ask about the plan funding status, " says Andrew Wozniak, an actuary at BNY Mellon Asset Management, which manages investments for dozens of large company pension plans.
In the past, I have almost always advised retiring public sector employees to resist the temptation to take their accumulated pension benefit in a lump sum.
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Pensioners could still take up to a quarter of the pension scheme as a tax free lump sum.
Furthermore, the government extracts a tax penalty if pensioners choose to take a lump-sum payment on reaching retirement.
One reason to wait until year end to take your distribution for 2012 in one big lump is to let the money continue to grow tax-deferred as long as possible.
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I've asked my management several times if I can take my "smoker's holiday" all in one lump so I can nip off to Australia to watch the Ashes.
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