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Question for the Money Doctors

Question submitted on Jun 27, 2012.

Question

I am 60 years old and want to retire in 2 1/2 years.At that time I will receive $316,000.00 lump sum pension.My house will also be paid off ($11,000.00 left on mortg.)I am single and no children with $200,000.00 in 401K.Should I take $100,000.00 out of 401K and place in a variable annuity with MetLife,5% return and not use for 10 years.

Answer

If you are concerned about having a guaranteed lifetime income, an annuity is a logical option.  You might want to investigate the possibilty of annuitizing a portion of the company pension instead of taking the entire amount as a lump sum distribtion.  It's possilble the fees will be lower compared to the MetLife annuity.  Then you could use the entire 401k balance to supplement the monthly annuity payment as needed.  Another option to explore would be purchasing a lower cost deferred income variable annuity through a fee-based investment advisor.  The advisor may be able to steer you toward a company with lower fees,  such as Vanguard. 


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