Reply to Divorce and FERS- will you really not remarry?

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[quote=Anonymous][quote=Anonymous]You should “always take the lump sum” rather than the annuity. [/quote]

Not necessarily true. Many people who take their pensions as lump sums when they leave an employer cash them out. And then owe taxes. You’ve probably seen the stories about the lottery winners who are now bankrupt—and the ones who invested wisely. If you blow it on that dream vacation + car, you’ll have a much worse retirement. Plus you take on market risk if you keep it as s lump sum, the risk that the market tanks just as you need to sell a huge chunk.

Pension annuities and Social Security actually offer something really valuable, which is a guaranteed income stream for life. Yes annuities can be over-priced, and you’d never want to annuities all your assets, and don’t get an annuity of you think you’ll die younger than average. But your X’s pension plan is probably well-managed (unless you think the company is going bankrupt...) and at low cost relative to plunking it all in an IRA and paying fees at the retail rate for an individual.

Take the lump sum if you’re confident in your ability to invest it wisely (get advice if you need it) and lock it away until retirement. [/quote]

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