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I have an opportunity to take a lump sum from a pension from a private company that I use to work for that was frozen in 2005.
Details of the plan
• Lump Sum today 77K
• Age 65 –Lump Sum 150K
$770/month annuity for 100% survivor benefit/$904 Single Annuity. I prefer to use the survivor benefit
• If I die before I draw or roll over, my wife would get 50% of Retirement Plan Lump Sum at that time
• No COLA
• No health plans attached
• No end date to make decision at this time.
• Company solid
Family Situation
• I am 51 and plan to work 11 more years (62). We have 2 kids.
• My wife is a stay at home mom with no significant retirement savings
• Debt free but the house, plan to have it paid off by retirement
• Life longevity on both sides in the mid to upper 80’s. We are in good health
• I have no other pensions and been investing in a 401K since the freeze, the offered pension lump sum
would account for around 20% of our current retirement savings.
I have considered the following
• Roll into an IRA over the next 12 years until retirement. I don’t have any need for cash today, this
would be a roll over.
• If something was to happen to myself and my wife, the pension would go away and could not give it to
our kids.
Any advice or something I am not thinking of?
When can you start drawing from pension?
Buy term life insurance until 60 if you're worried about money.
I can start drawing from pension at any time, now would be $320/month. I have term insurance until I am 62. I don't see the need to draw the pension now.
Good job on giving us info.
Can you get any info from your HR that will help you analysis the situation?
Looks to me that you will earn about 6% a year to get to the 150,000. With no risk this is not a bad return.
Looks like you payout will be about 6% (770) a year. You probably can not buy an annuity that good.
I would lean toward taking the 770.
Go to a site such as Vanguard and look under investments and find annuities. Then see what you can buy with the 77,000 and what it will pay when you are 62.
Also try one for 150,000 assuming you are 62 now.
The object is to see if today's annuities can beat what you are being offered.
I'd at least wait until 65 since it's guaranteed 5% growth and you'll have a better picture of your retirement. Then take the annuity if you plan to live past 80.
Good job on giving us info.
Can you get any info from your HR that will help you analysis the situation?
Looks to me that you will earn about 6% a year to get to the 150,000. With no risk this is not a bad return.
Looks like you payout will be about 6% (770) a year. You probably can not buy an annuity that good.
I would lean toward taking the 770.
Go to a site such as Vanguard and look under investments and find annuities. Then see what you can buy with the 77,000 and what it will pay when you are 62.
Also try one for 150,000 assuming you are 62 now.
The object is to see if today's annuities can beat what you are being offered.
Thanks Rjm1cc...I never thought of the 6% calculation on the 770/month annuity at 65, that makes it more desire to keep. I was looking at the growth between now and 65 mainly.
I have an opportunity to take a lump sum from a pension from a private company that I use to work for that was frozen in 2005.
Details of the plan
• Lump Sum today 77K
• Age 65 –Lump Sum 150K
$770/month annuity for 100% survivor benefit/$904 Single Annuity. I prefer to use the survivor benefit
• If I die before I draw or roll over, my wife would get 50% of Retirement Plan Lump Sum at that time
• No COLA
• No health plans attached
• No end date to make decision at this time.
• Company solid
Family Situation
• I am 51 and plan to work 11 more years (62). We have 2 kids.
• My wife is a stay at home mom with no significant retirement savings
• Debt free but the house, plan to have it paid off by retirement
• Life longevity on both sides in the mid to upper 80’s. We are in good health
• I have no other pensions and been investing in a 401K since the freeze, the offered pension lump sum
would account for around 20% of our current retirement savings.
I have considered the following
• Roll into an IRA over the next 12 years until retirement. I don’t have any need for cash today, this
would be a roll over.
• If something was to happen to myself and my wife, the pension would go away and could not give it to
our kids.
Any advice or something I am not thinking of?
Thanks!
Great info as someone here said. This is me and only me. I would take the roll out and deposit it in a tIRA. You have 11 years before you say you need it. You have a current 401k that I believe you are investing in. It doesn't tell us how much you are investing there but lets assume 8 to 12% of current income (including match). Not having a term life policy is troubling but.... everyone has a limit. I would hope that you have enough insurance to cover the mortgage at least.
That being said. With 11 years your initial investment of 77k today could be tripled or more in that time. Especially if you continue to put money into it as well. A good balanced index fund will provide growth over that time. At about 8 years look at where the market is and what it has been doing. There will also have been an election and those are the times to evaluate and adjust. At about that time it will be time for you to lock in your gains effectively lowering your growth some to provide income stability. With any financial company your 77k will buy you personalized help. I suggest Vanguard but others will say Fidelity or Charles Schwabb.
Either take it all out now and reinvest [depending on how much you trust the market]. Or sit on it and wait until you retire, consider it a boost to your SS.
Good job on giving us info.
Can you get any info from your HR that will help you analysis the situation?
Looks to me that you will earn about 6% a year to get to the 150,000. With no risk this is not a bad return.
Looks like you payout will be about 6% (770) a year. You probably can not buy an annuity that good.
I would lean toward taking the 770.
Go to a site such as Vanguard and look under investments and find annuities. Then see what you can buy with the 77,000 and what it will pay when you are 62.
Also try one for 150,000 assuming you are 62 now.
The object is to see if today's annuities can beat what you are being offered.
Good assessment. Another possibility is to take the $910 annuity for a single life and then buy a term life policy to protect wife and family interest. This represents about 7.5-percent interest. Another factor is that anything except a rollover into another IRA, will likely cost you 25-percent of the payout in that year's taxes.
I have no immediate need for the cash and plus the taxes and penalty would kill me, any lump sum I do will be a rollover to an IRA
I currently have a term policy in place until I am 62. Good points on that contingency if something were to happen to me ,that would make up for the 50% loss from the lump sum survivor benefit before the draw, so I shouldn't dwell on that too much.
Thanks for the tips so far, some things I never thought about
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