Social Security

• Social Security is one component of a retirement plan. Social Security allows you to draw benefits for your entire life when you retire. But, benefits are graded. In order to get the maximum Social Security benefit, you must wait until your full retirement age. Normally, this means age 67, though technically it is based on your age. If you were born before 1942, then your full retirement age is 65. If you were born 1943 to 1959, age 66 is your normal retirement age. If you're born in 1960 or later, then 67 is your normal retirement age.
  
  

Pension

• Pensions may be from a government that you work for or from a private employer. Pensions are benefits paid for by your employer that are paid out to you on retirement. These benefits are defined benefit payments. This means that the benefit is known in advance before you retire. Pensions allow you multiple choices as to how you receive your funds. The maximum benefit for your pension will be either the single-lifetime payments or the lump-sum amount. Single-lifetime payments means that you receive your full pension benefit apportioned out monthly for as long as you live and your spouse gets nothing when you die. A lump-sum payment gives you the total amount of money saved up for you as a lump-sum amount. The major difference between the the lifetime payments and the lump sum is that the lifetime payment has an additional interest rate factor associated with it since it is invested while you are receiving payments. The lump sum must be invested in a fixed-interest account by you to achieve the same amount you would otherwise receive from the pension plan.
  
  

401(k)/IRA

• 401(k) plans and IRAs are retirement plans that represent a personal savings. The maximum benefit amount from these accounts depends entirely upon the investments you make in the account. If you want the benefits immediately upon retirement, the lump-sum amount will give you the maximum benefit from Roth-type accounts. With traditional 401(k) plans and IRAs, you may receive the maximum benefit by taking payments over time using a life insurance company mortality table. This is because traditional IRAs and 401(k) plans are subject to taxation when you make withdrawals. If you leave the money invested while taking monthly or annual withdrawals from your traditional account, the interest may offset the taxes you pay resulting in a higher total amount of money received from the account.
  
  

Annuity

• An annuity is an insurance policy. The insurance policy guarantees to pay you a set monthly amount over your lifetime or for a set number of years. The maximum benefit amount from an annuity can be achieved by delaying your retirement for as long as you can, and then taking the single lifetime payment option. This will not leave any money for your beneficiaries, but will give you the maximum monthly payment possible from an annuity. If you want or need the maximum total amount, you may have to accept lower monthly payments. For a maximum total distribution, you might be better off choosing payments over a set number of years. This is because single life payments stop when you die. If you die before the time you would have otherwise used up your savings, then you will have actually lost money since the insurance company keeps the remaining annuity balance. If you choose a period certain option (payments for a set number of years), then the insurer will return all of your money to you with a fixed interest rate declared by the company. The maximum benefit amount largely depends on how long you live.