Annuities & Pensions: What's the Difference? [Compare & Contrast]

Annuities and pensions are sometimes represented as if they were the same things.

Indeed, they share many features in common. For example, both instruments:

(1) Can be used to generate retirement income;
(2) Are likely at least partially taxable;
(3) Have restrictions (like age) on accessibility;
(4) Involve irrevocable settlement elections;
(5) Offer similar payout & survivorship options;
(6) Promise installment payments for a lifetime;
(7) Are considered "guaranteed-income" products;
(8) Can still be lost or threatened;
(9) Are susceptible to market forces; and...
(10) Have government-backed "safety nets."

Nevertheless, there are differences between annuities and pensions. For instance, annuities and pensions:

(1) Are offered by different types of companies;
(2) Are "guaranteed" in different ways;
(3) Are funded differently;
(4) Involve different money managers;
(5) Have different "controlling agreements";
(6) Differ in terms of whether "vesting" is applicable;
(7) Are unlike one another in virtue of who establishes settlement options;
(8) May differ with respect to eligibility ages;
(9) Contrast in terms of whether recipients must be retired; and...
(10) Consider distinct factors when calculating payment amounts.

In this video, then, I compare and contrast annuities and pensions.

Disclaimer: This presentation is intended for general informational or entertainment purposes only. I am not a financial adviser or retirement expert and nothing herein should be construed as providing financial, insurance, investment, legal, retirement, savings, tax, or any other sort of advice. For personalized evaluations and recommendations, consult licensed professionals in your area.

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