Turn Cash Balance Retirement Plans Into Immediate Annuites
For employees who have a cash balance retirement plan at work, they have the choice of taking a lump sum payout at retirement or taking annuity payments over time. According to Steve Vernon’s CBS News article, “Cash balance retirement plans: Annuity options,” many large companies offer this type of hybrid 401k and pension plan. Cash balance plans are like 401k plans because you put money into an accumulating account where you take the entire amount with you when you leave the company or retire. They are like pensions in that employers take on all of the risk associated with the investments and you have the option for a lump sum payout or annuity payments at retirement.
If you take a lump sum payout, you can transfer your money to immediate annuities with a life insurance company or roll it into another type of investment. With the annuity option through your cash balance retirement plan, you would likely receive higher monthly payments that any option you could find outside of the plan. Also, women receive the same monthly payment as men in the cash balance annuity, unlike with traditional annuities. Employer-sponsored plans cannot discriminate for sex, even though women tend to live longer than men and receive lower annuity payments from insurance companies. If you are lucky enough to have a cash balance retirement plan from your employer, it is likely that the annuity option is your best choice to cover your retirement expenses.
Written by Rachel Summit
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