1. Receive a lump sum and take it as cash or roll it over into an IRA. $13,000 is the payout. Subject to taxes and IRS penalty if taken as cash.

2. Receive annuity in the form of $75/month starting in December 2014 and continuing until I die

3. Defer all payments until I'm 59.5, or whenever I chose. If I wait until age 66, I would get $375/month until I die.

Assuming you will live 50 more years, get 5% after-inflation returns, tax rate = 25%, inflation = 3%, and have an option to wait 34 years for a higher monthly annuity:

n = 50

r = 5%,

t = 25%

i = 3%

m = 34.

Present Value of options:

1. $13,000

2. $75 * 12 * (1 - t) * (1 - (1 + r)^-n) / r = $900 * 0.75 * (1 - 1.05^-50) / .05 = $12,322

3. $375 * 12 * (1 - t) * (1 - (1 +r)^-(n - m)) / r / (1 + i)^m = $4500 * .75 * (1 - 1.05^-16) / .05 / 1.03^34 = $13,389

Given the uncertainties in r, t, i, and m, for the values chosen it's reasonable to say all options are ~equal - not too surprising if the former employer has good actuaries. So just pick one and don't look back.

Except for one thing: in option 1 you get to defer taxes in the IRA. If you expect to be in a lower (e.g., 15%) tax bracket in retirement, option 1 gets my vote. Otherwise it's back to a 3-sided coin flip.

Brief background on the formulas (edification for some, and an opportunity to critique for others):

Calculation for option 2 is for annuity present value. See the first formula in

http://en.wikipedia.org/wiki/Annuity_(finance_theory).

Calculation for option 3 is for annuity present value at age 66, discounted back to today's value based on assumed inflation.