Pension Options: Lump Sum, Immediate Annuity, or Deferred Annuity?

[NotMyRealName]

I am 57 years old and my husband is 58. We are not in great shape financially due to a recently failed business venture followed by bankruptcy. We have a net worth of about $75K, mostly in my current employer’s 401K. We owe about $23K in daughter’s student loans at 6.8%, and we still have a home mortgage balance of about $168K.

I’ve just been given a one-time offer by two of my former employers for the following pension options.  I have no other pensions other than those mentioned here (and my current employer’s 401K).

Employer A is offering a lump sum of $22,886, or a monthly pension of $203.44 starting at age 65 (with 100% survivor benefit for my husband), or a monthly annuity of $119.89 starting immediately (with 75% survivor benefit).

Employer B is offering a lump sum of $43,194, or a monthly pension of $411.25 at age 65, or an immediate monthly annuity of $236.47 (with 100% survivor benefit).

The lump sums can be rolled into an IRA which will avoid all taxes for now; the monthly annuities will be taxable.

Any idea what I should do?

[Gone Fishing]

Given your current position, I'd take the 65 year options on both (with survivor’s benefit if possible).  You are going to need all the guaranteed cash flow you can muster for retirement.  That may mean working until 70.5 or later, if possible.  Let your daughter pay her own loan.  Plow back everything you can into either the mortgage if the rate is over 5% or so, or your 401(k)/IRA.  Don't get too aggressive with your asset allocations.  A target date fund would probably be appropriate.  I don't know what your cash flow looks like, but right now, but retirement savings/debt pay down should be your #1 priority, you have precious little time to shore up your retirement.  Sorry to be blunt but just calling it as I see it.  You might consider doing a case study. 

[RichMoose]

Go for the payments at 65, steady income is important in your situation.

I'll also get a little facepunchy here... Why in the hell are you footing the bill for your daughter's education when you are worth only $75k less than 10 years away from theoretical retirement age?

[MayDay]

I just got a similar offer, and opted to roll it into an IRA.  However I am young and expect to die on the early side, as does my husband.  I opted for the lump sum. 

In your case I would take the pension at age 65.  You have very little saved, little time to save more, and that 600$ a month plus 1000$ or so from SS should be enough for a very frugal retirement.  Very. Frugal.  In other words, better get your house paid off before then.