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Important Note:

June through November our agency may become prohibited from binding coverage should a “Tropical Disturbance” enter the Gulf of Mexico or Caribbean Sea.

In these cases we may be unable to bind new coverage quoted in open proposals until the storm leaves our area and our binding authority has been restored.

Please arrange your coverage protection early to avoid this type of delay. While we regret any inconvenience, the carriers impose these restrictions on all agencies.

Should You Sell Your Pension for a Lump Sum or Insurer’s Annuity?

Pensions are becoming less popular with American employers—and many are choosing to offer their retirees and older workers lump sums or annuities in exchange for removing the pension obligation from their books. Why are companies moving away from this traditional retirement vehicle? Experts say it’s because pensions are so difficult to maintain. Frequent regulatory changes and rising Pension Benefit Guaranty Corp (PBGC) insurance premiums are playing a major role. Unfortunately, this has left numerous seniors with a difficult decision: should they take a lump sum or insurer’s annuity?

Insurer’s Annuity

With a traditional pension, the PBGC guarantees the benefits, protecting seniors in the event that their former employer goes bankrupt. With an annuity, the insurance company itself is the source of security. Should the insurer fail, the state guaranty association will step in, but coverage limits vary. According to the AARP, maximum lifetime coverage for insurer’s annuities range from $100,000 to $500,000 and are subject to the rules of your particular annuity product.

If you are considering selling your pension for an annuity, evaluate the financial health of the insurer. Credit ratings are important, and AM Best, Fitch, Moody’s, and Standard and Poor’s regularly rate insurance companies. Those considered superior score A+ or A++ ratings with AM Best and A, AA and AAA ratings with the other three. If the annuity offered is not through a highly rated insurer, you may want to pass.

Lump Sum

Lump sum pension buy-outs worry retiree advocates much more than insurer’s annuities do because it’s all too easy to make a bad investment or otherwise squander the money, leaving nothing for later years. If you’re considering a lump sum in exchange for your pension, The Pension Rights Center suggests you roll the money immediately into your IRA. This will keep the government from treating it like taxable income and facilitate further investment over impulse purchases.

Additionally, consider your health and life expectancy. Lump sum calculations rely on average life expectancies. If you’re health is poor and your spouse does not require survivor’s benefits, it can make sense to take a lump sum and enjoy the money now. However, if you beat the odds and live longer than expected, you may find that your retirement savings fall short as a result.

Whether your former employer is offering you a lump sum, an insurer’s annuity or a combination of the two in exchange for your pension, you may wish to contact a trusted financial advisor before making a decision. He or she can help you evaluate your current financial situation, interest rates, risk of inflation and other factors to choose the best option for you.