Timur and Maurguerite recently met with the benefits administrator at Timur's employer to establish a retirement...
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Timur and Maurguerite recently met with the benefits administrator at Timur's employer to establish a retirement date and to discuss payout options for his pension. Timur just turned 67, while Maurguerite, a self-employed artist, will be 62 in 6 months. The benefits administrator was helpful in outlining potential sources of income that they can expect in retirement. Annual estimates are as follows: Social Security $9,000 Defined Benefit $12,000 (single life annuity) Maurguerite's Work $5,000 Defined Contribution $10,000 (single life annuity) Other $4,000 The defined contribution payout was calculated based on a 401(k) balance of $250,000 earning approximately 8 percent. The benefits administrator indicated that a 100 percent joint and survivor annuity would decrease yearly benefits by about $2,000 in the defined-benefit plan and $1,500 in the defined-contribution plan. Timur's company does not offer an annuity for life option. • What are the advantages associated with taking the pension payouts in the forum of an annuity? What are the disadvantages? • Based on the information provided, which type of annuity would you recommend that Timur and Marguerite choose given the difference in their ages and earnings? • What recommendation would you make to Timur and Marguerite to help them monitor expenses and safeguard their retirement lifestyle? Timur and Maurguerite recently met with the benefits administrator at Timur's employer to establish a retirement date and to discuss payout options for his pension. Timur just turned 67, while Maurguerite, a self-employed artist, will be 62 in 6 months. The benefits administrator was helpful in outlining potential sources of income that they can expect in retirement. Annual estimates are as follows: Social Security $9,000 Defined Benefit $12,000 (single life annuity) Maurguerite's Work $5,000 Defined Contribution $10,000 (single life annuity) Other $4,000 The defined contribution payout was calculated based on a 401(k) balance of $250,000 earning approximately 8 percent. The benefits administrator indicated that a 100 percent joint and survivor annuity would decrease yearly benefits by about $2,000 in the defined-benefit plan and $1,500 in the defined-contribution plan. Timur's company does not offer an annuity for life option. • What are the advantages associated with taking the pension payouts in the forum of an annuity? What are the disadvantages? • Based on the information provided, which type of annuity would you recommend that Timur and Marguerite choose given the difference in their ages and earnings? • What recommendation would you make to Timur and Marguerite to help them monitor expenses and safeguard their retirement lifestyle?
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Answer 1 The advantages of taking pension payouts in the form of an annuity include the following Pa... View the full answer
Related Book For
Concepts in Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
Posted Date:
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