Advantages

• Fixed monthly income for life and the security of knowing that payments will continue on a regular basis.
• You don't have to actively manage your pension amount.
• Option of spreading the payments out over your spouse's lifetime as well as your own.
• Confidence in knowing you can't outlive your pension.

Disadvantages

• Once you start to receive an annuity, you can't elect a lump-sum distribution.
• If you select an annuity today, you will be unable to take advantage of interest rate increases, since you have a fixed monthly payment.
• If you die prior to your life expectancy, you and your beneficiary, if applicable, may not collect the full value of your accrued benefit. For example, suppose at retirement your spouse waives his or her right to your pension, and you choose a life annuity. Assume you live for only one year and then die. Your beneficiary will not receive payments, since you chose the life annuity option.

Before accepting an annuity form of payout from your retirement plan, compare it with the benefits you would receive by rolling over a lump-sum distribution into an annuity purchased from an insurance company.