facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Annuity Payment Definitions in Plain English Thumbnail

Annuity Payment Definitions in Plain English

So you are pondering retirement from your employer and they provide you with an Annuity option, Lump Sum option and some variations of both options in your pension plan. Today I just want to cover the Annuity options that many company pensions provide. I'm going to list these with plain definitions that are easy to understand in hopes that it can help you make an informed decision.

Typically, these are the options you will be given:

Life Only Annuity-When you die the annuity payments stop. Period. End of story. This will always be the highest monthly payment.

10 Year Certain & Life- Annuity Payments are guaranteed for a minimum of 10 years or as long as you live. If you die in year 1 after retirement, annuity payments will be made to your beneficiary for 10 years after the last annuity payment was made before your death. Typically the 2nd highest monthly payment.

Life Only Cash Refund-When you die your beneficiary will receive the Death Benefit minus the annuity payments received. Ex. If your lump sum amount is $300,000 and your Life Only Cash Refund Annuity payment is $2,000 per month and you live 10 years after retirement your beneficiaries will get... $300,000-$240,000=$60,000. This is typically the 3rd highest monthly payment.

50% Joint and Spouse- When coop employee dies the monthly annuity will pay 50% of the original amount and will continue to the spouse until they die and then annuity payment will stop. This is typically the 4th highest monthly payment initially.

50% Joint and Spouse Cash Refund- When coop employee dies the monthly annuity will pay 50% of the original amount and will continue to the spouse until they die and then any balance will go to the designated beneficiary. This is typically the 5th highest monthly payment initially.

75% Joint and Spouse- When coop employee dies the monthly annuity will pay 75% of the original amount and will continue to the spouse until they die and then annuity payment will stop. This is typically the 6th highest monthly payment initially.

75% Joint and Spouse Cash Refund- When coop employee dies the monthly annuity will pay 75% of the original amount and will continue to the spouse until they die and then any balance will go to the designated beneficiary. This is typically the 7th highest monthly payment initially.

100% Joint and Spouse- When coop employee dies the monthly annuity will pay 100% of the original amount and will continue to the spouse until they die and then annuity payment will stop. This is typically the 8th highest monthly payment initially.

100% Joint and Spouse Cash Refund- When coop employee dies the monthly annuity will pay 100% of the original amount and will continue to the spouse until they die and then any balance will go to the designated beneficiary. This is almost always the lowest monthly payment.

Whew!!! You still awake??? Exciting stuff isn't it? All this talk about death and money is invigorating!!!

At 80/20 Financial, we take the time to understand your personal financial goals. Retirement is one of the biggest decisions of your life and we believe it's worth getting a second opinion. We would be honored to give you that second opinion. Contact us today!

For more articles about your electric cooperative retirement click here.

Brian Coleman/Retirement Planning Specialist