What Happens to Your Pension if You Don’t Roll It Over into an ​Annuity—And Why An Annuity Could Be Your Best Option for ​Long-Term Security

If you’re approaching retirement and fortunate ​enough to have a pension, you may be wondering ​what happens to that hard-earned money if you ​don’t roll it over into an annuity. Many people ​overlook the importance of this decision and ​assume their pension will automatically take care ​of them and their family throughout retirement. ​However, the reality can be far more ​complicated—and costly—than expected.

Let’s explore what happens to your pension if ​you don’t roll it over into an annuity and why ​choosing an annuity could be the best decision ​for long-term financial security.

What Happens If You Don’t ​Roll Over Your Pension?

Pensions are designed to provide a steady ​stream of income during retirement, ​typically paid out in monthly installments. ​But if you choose to leave your pension as-​is and don’t roll it over into an annuity, ​there are significant risks and limitations ​that could affect both you and your loved ​ones.

1....Spousal and Child Benefits Are Limited: One of the most critical and often overlooked issues is ​what happens to your pension when you pass away. If you die before your spouse, they will typically ​receive only half of the pension benefits you were receiving. Worse, if you have a child under the age of ​18, they will also receive only half of what you would have been entitled to—until they turn 18. After ​that age, any remaining funds are typically forfeited.

This means that even if you’ve diligently worked and contributed to your pension for decades, your ​family may only receive a fraction of what’s left. And if you don’t have a spouse or children under 18? ​The money goes back into the system—you’ve essentially worked all your life, only to see your ​retirement savings vanish into thin air.

2....Lump-Sum Taxation: If you decide against rolling your pension over into an annuity, you may be ​offered a lump-sum distribution. While getting a large amount of cash upfront may sound appealing, ​this can be a financial trap. A lump-sum payout is typically subject to hefty taxes, which can not only ​reduce the amount of money you actually take home but could also push you into a higher tax bracket ​for that year.

On top of that, without careful planning, it’s easy to spend through a lump sum more quickly than ​expected, leaving you with less money to support yourself through retirement.

2....Risk of Outliving Your Pension: If you stick with your pension’s monthly payouts without rolling it ​over into an annuity, you run the risk of outliving the payments. While some pensions are designed to ​last for life, others have limits, meaning your benefits could run out before you do. If you live longer ​than expected, you may find yourself with no income during your later years, at a time when you need it ​the most.

3....Market Volatility: If your pension is tied to investments, fluctuations in the market can impact the ​amount you receive in your pension payments. Without a guaranteed income, market downturns could ​leave you financially vulnerable and threaten your retirement security.

Why Rolling Over Your ​Pension into an Annuity is ​the Best Move

Given the risks, you may wonder whether there’s ​a better option. That’s where rolling your pension ​over into an annuity comes in—a financial tool ​that can protect you from the dangers of ​outliving your money, market fluctuations, and ​insufficient payouts for your loved ones.

Here’s why rolling your pension into an annuity ​could be your best option:

1....Guaranteed Income for You—and Protection for Your Family: One of the greatest advantages of an ​annuity is the ability to ensure guaranteed lifetime income for both you and your spouse. Unlike ​pensions, where your spouse may only receive half (or less) of what you were getting, an annuity can be ​customized to provide equal or nearly equal payments for your spouse if something happens to you. ​This means your loved ones won’t have to struggle with half payments or watch their financial security ​dwindle.

Additionally, if you have children, you can also structure your annuity to ensure that any remaining ​funds go to them. This gives you far more control over where your money goes, ensuring that what you ​worked so hard for stays with your family—not forfeited back to the system.

2....Protection from Running Out of Money: With an annuity, you don’t have to worry about outliving ​your retirement income. Annuities are designed to provide guaranteed payments for as long as you live, ​offering peace of mind that you’ll always have a steady income to support your lifestyle, no matter how ​long you live.

3....Tax-Deferred Growth: When you roll over your pension into a qualified annuity, the money grows ​tax-deferred. This means you won’t pay taxes on the funds in your annuity until you start receiving ​payments, allowing your savings to grow more effectively over time.

4....No Market Risk: Annuities are not subject to the ups and downs of the stock market. While your ​pension could be vulnerable to market fluctuations, an annuity provides a predictable, stable income ​stream that isn’t impacted by the economy. This is especially important during periods of market ​volatility, when other forms of retirement income could be at risk.

5....Customizable for Your Needs: Annuities are highly flexible and can be tailored to meet your specific ​financial goals. You can choose options like inflation protection to ensure your payments keep up with ​the rising cost of living or add a survivor benefit to ensure your spouse continues to receive payments ​after your passing.

6....Estate Planning Benefits: Unlike many pension plans, an annuity can be structured to leave any ​remaining balance to your beneficiaries after you pass away. This ensures that your hard-earned money ​stays within your family and provides a legacy for your loved ones.

The Bottom Line: Secure Your Financial Future

Rolling over your pension into an annuity can help you avoid the potential pitfalls of ​traditional pension plans, such as limited spousal benefits, heavy taxation on lump-sum ​payouts, and the risk of outliving your income. An annuity provides a reliable, guaranteed ​income stream for life while offering the flexibility and protection your family needs.

Before making any decisions, it’s essential to consult with a financial advisor to ensure ​that an annuity is the right fit for your retirement goals. But one thing is clear: rolling over ​your pension into an annuity could be the smartest move to safeguard your future—and ​that of your loved ones.

You’ve worked hard for your retirement—make sure it works hard for you.

Ready to Protect Your Retirement? Contact The Shark Insurance ​Agency Today!

At The Shark Insurance Agency, we understand that securing your financial future is more ​than just about the numbers—it's about ensuring peace of mind for you and your family. ​Whether you’re considering rolling over your pension into an annuity or need ​personalized advice for your retirement strategy, our team of experienced advisors is ​here to guide you every step of the way.

Don't wait until it's too late—CONTACT US TODAY to schedule a free consultation and ​discover how an annuity can provide lifetime income and protect your loved ones. Call us ​at 773-900-6659 or Or click the Schedule Appointment Link.

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