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I have a small pension. $60.41 a month if taken now (70%) or wait until age 65 to get the full 100%.
They are offering some employees a lump sum. My lump sum would be $10,550.02.
At $60.41 per month, I'd have to live another 14.55 years to break even on it.
They said they used IRS published interest rates and IRS mortality table under IRS code 417.
Can I rely on the IRS to properly have calculated the numbers?
I know this is a smallish pension, but has anyone had to make such a decision, and what factors did you take into consideration.
How big a bite would the tax man take out of the $10K?
I would favor taking the lump sum unless the tax man taketh
too big a bite
Since the lump is not a round number, with that .02 tacked on the end of it, they clearly used a formula to calculate. They used age and "mortality" from the IRS mortality table in the IRS code.
We already have the IRS determining things for us.
Now, we have the security of knowing that we can go to the IRS mortality table and see when they expect us to die.
That table shows us the age at which the IRS (and maybe the employer too) expects us to be gone, so we don't come out ahead of the game by declining the lump sum and milking them by the month, forever.
Well, maybe many years past the age the IRS code says is the end.
But...isn't the lump sum taxable? Have you figured out what the tax would be and whether or not it would push you into a different tax bracket...that kind of thing? I know the lump sum I received when I was retired was taxed at a rate that assumed I made that kind of money every pay period (two weeks). Please be careful...
Yes it's taxable unless you roll it over into an IRA. I would take the lump sum and put it into a Roth Ira and add to it every year. If you roll it over make sure you follow all of the IRS guidelines or else you will end up like my friend in deep shyte with the IRS with no hope of ever digging out. Damn IRS Natzi terrorists. One mistake and your life is over.
Yes it's taxable unless you roll it over into an IRA. I would take the lump sum and put it into a Roth Ira and add to it every year. If you roll it over make sure you follow all of the IRS guidelines or else you will end up like my friend in deep shyte with the IRS with no hope of ever digging out. Damn IRS Natzi terrorists. One mistake and your life is over.
There was a bit of advice to have the holder (emplyer) send it to the designated IRA versus pay the owner (employee) then the owner places it in an IRA. Meaning the IRS sees it as income if the owner gets the money versus sent direct to the IRA account.
I have a small pension. $60.41 a month if taken now (70%) or wait until age 65 to get the full 100%.
They are offering some employees a lump sum. My lump sum would be $10,550.02.
At $60.41 per month, I'd have to live another 14.55 years to break even on it.
They said they used IRS published interest rates and IRS mortality table under IRS code 417.
Can I rely on the IRS to properly have calculated the numbers?
I know this is a smallish pension, but has anyone had to make such a decision, and what factors did you take into consideration.
Are you saying that you would receive $86.30/mth if you wait until age 65? If you waited until age 65 would you still have the lump sum option and would it remain at $10,550.02?
That figure is close to being accurate. The $60.41 is based on a mid-year calculation.
Also, this may not be like other pensions.
It has nothing to do with being retired in the eyes of Social Security.
It's just a benefit that can begin at age 55 or after, once you leave the company.
The lump sum option was a surprise to me, since it was not an option once I left the company.
I have no way of knowing if a lump sum would be offered at a higher age.
I was thinking this would be a no brainer to me if there was an extra zero($604.10 per month or $105,502 cash out). For some reason that makes it easier for me to see. So,it is the same ratio and I would take the lump sum.
I have a small pension. $60.41 a month if taken now (70%) or wait until age 65 to get the full 100%. They are offering some employees a lump sum. My lump sum would be $10,550.02. I know this is a smallish pension, but has anyone had to make such a decision, and what factors did you take into consideration.
Ya' know, I don't know why you are even asking this question, unless you're bored. You've posted a number times on Investing on options strategies, puts, calls, spreads, etc., and positions you've taken.
Clearly, you know enough about investing, the time value/investment value of a $, not to accept a paltry payout of $60/mo over a lump sum of $10k, and also know enough to avoid taxes by rolling that $10k over into an rollover.
I have a small pension. $60.41 a month if taken now (70%) or wait until age 65 to get the full 100%.
They are offering some employees a lump sum. My lump sum would be $10,550.02.
At $60.41 per month, I'd have to live another 14.55 years to break even on it.
They said they used IRS published interest rates and IRS mortality table under IRS code 417.
Can I rely on the IRS to properly have calculated the numbers?
I know this is a smallish pension, but has anyone had to make such a decision, and what factors did you take into consideration.
If you invest in a good growth mutual fund you can reasonably expect to make at least 6% or (with some luck) 10% per year. If you make 6 percent, your interest accrued will come to $52.75 per month. If, however, you can manage 10% your interest will come to $87.91 per month.
If, however, you do not need that money to live on, you can compound that interest and in 14 years you will have $40,063.68, in that account (at 10%).
Honestly, if you don't need the money now to survive, I'd just take the lump sum and put it into a good growth mutual fund and watch it grow!
20yrsinBranson
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