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Old 06-17-2019, 08:31 PM
 
42 posts, read 8,050 times
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I am probably going to be terminated soon and was very recently vested at the company I work for. They take 7 percent out of my pay check. I also want to mention that this is a municipality so this is a pension and not a standard 401K. I only have about 15K at this time but the company matches 2:1. I spoke with the company in charge of the pension and was told that I am eligible to retire at 60 and 62. I think at the age of 62, I would have a 1,600 dollar pension (I know not much). I am still rather young, (in my early 30's.) Should I withdraw this money upon termination or just leave it alone. My thoughts were just to leave it alone. Thanks for any advice.
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Old 06-18-2019, 01:44 AM
 
Location: on the wind
7,072 posts, read 2,899,892 times
Reputation: 23934
Quote:
Originally Posted by HolyGuacomole View Post
I am probably going to be terminated soon and was very recently vested at the company I work for. They take 7 percent out of my pay check. I also want to mention that this is a municipality so this is a pension and not a standard 401K. I only have about 15K at this time but the company matches 2:1. I spoke with the company in charge of the pension and was told that I am eligible to retire at 60 and 62. I think at the age of 62, I would have a 1,600 dollar pension (I know not much). I am still rather young, (in my early 30's.) Should I withdraw this money upon termination or just leave it alone. My thoughts were just to leave it alone. Thanks for any advice.
There is some missing information here. We don't know the rules that govern your pension. You'll have to ask your employer what your options will be with the pension balance that exists at the time of termination. They might require you to withdraw the funds entirely. You could invest it, roll it into another pension plan offered through a new employer, or spend it.

If you end up being terminated in your 30s, it won't matter what their retirement age is. You won't be their employee. You may not be able to continue to contribute to the account. They won't be matching anything either because there's nothing to match...you are off their payroll.

If you are terminated would you be eligible for and want to apply for another position with the same municipality? If so, you might be able to keep the pension active and start contributing to it again out of your new salary if you do get a new job with the same employer.

If you can't contribute to the account after you are terminated, the money will sit there, maybe earning a little bit on the balance if it is an interest-earning account. Probably a very low rate so it won't be growing much.

Last edited by Parnassia; 06-18-2019 at 02:04 AM..
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Old 06-18-2019, 05:31 AM
 
Location: Ypsilanti, MI
2,430 posts, read 3,657,283 times
Reputation: 4752
You are young, the balance is ~$15K and it is a start toward a Retirement Fund. My advice is to investigate moving the money into a Roth IRA, there will be a tax hit but it may be small with your stated balance, then continue contributing to this fund with after tax dollars for the next ~30 years till your eventual retirement. Make your final decision after getting additional information - and learning if your position is truly being eliminated.

A Roll-over IRA of the standard variety would not have a tax hit now, but it will have a tax hit in the future. It might be better to pay the hit now and fund this new account with additional after-tax dollars to avoid a bigger tax bite in the distant future

A local office of any of the national discount brokerages would be a place to meet face-to-face and ask questions about setting this up.

Best of luck

Last edited by MI-Roger; 06-18-2019 at 06:11 AM..
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Old 06-18-2019, 07:07 AM
 
242 posts, read 87,967 times
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Whether I'd leave it or roll it over depends on expenses in your fund. If you can get lower expenses by self directing your investments at Schwab, Vanguard, or Fidelity, I'd roll it over. At that small amount, you can get eaten up by the expenses of the fund(s) you are invested in.

I also like the idea of doing a Roth conversion.
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Old 06-18-2019, 08:00 AM
 
2,743 posts, read 6,412,288 times
Reputation: 2301
Quote:
Originally Posted by HolyGuacomole View Post
I am probably going to be terminated soon and was very recently vested at the company I work for. They take 7 percent out of my pay check. I also want to mention that this is a municipality so this is a pension and not a standard 401K. I only have about 15K at this time but the company matches 2:1. I spoke with the company in charge of the pension and was told that I am eligible to retire at 60 and 62. I think at the age of 62, I would have a 1,600 dollar pension (I know not much). I am still rather young, (in my early 30's.) Should I withdraw this money upon termination or just leave it alone. My thoughts were just to leave it alone. Thanks for any advice.
So, the lump sum cash out value would be $15K, right.

The $1600, is that per month? per year? in today's dollars that will adjust for inflation? Or in future dollars that will be devalued relative to today?

Doing the math on $15K invested for ~30 years, it could roughly grow to around $100K by 62, which could safely generate $4K a year by the 4% "rule". That is all in today's dollars, the amounts would actually be a lot higher with inflation. The nice thing about the 4% rule is that the withdrawals adjust for inflation each year, unlike a lot of pensions (that lose value as time goes by).
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Old 06-18-2019, 08:04 AM
 
2,132 posts, read 524,377 times
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Q: Should I take my retirement funds out or leave them alone?


A: Yes.
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Old 06-18-2019, 08:20 AM
 
429 posts, read 104,127 times
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If you don't understand investments and how to manage that money for the next 30 years then leave it alone and let it grow.

You can always roll it over/direct transfer that money later on in life as you learn more about investing.
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Old 06-18-2019, 08:40 AM
 
Location: Florida -
8,760 posts, read 10,829,371 times
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It's difficult to imagine how you will get to $1600 per month by 60-62, on a $15K investment today, following a termination, with no further contribution.

Your first action should be to clarify your options. They may require that you roll-over your $15K (or take a payout) upon termination. Otherwise, the management and tracking expenses over the years will likely cost them more than the $15K.

If you do a roll-over, a Roth (left alone) might be your best option. (A self-directed IRA investment account may be too tempting to avoid tapping, - with as far as you have to go to get to retirement.
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Old 06-18-2019, 11:22 AM
 
42 posts, read 8,050 times
Reputation: 27
Just to respond, I talked with the retirement person and this is what I was told. He told me I was already vested with the company. He said that I would continue to earn 5% compounded interest on those funds and my companies matching funds. He said it would be compounded for 29 years and upon me meeting eligibility to retire at age 60. All the interest plus my deposits and my companies matching funds would allow me to retire the account. He said it is a 2:1 match and my companies matching fund is 36,101.
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Old 06-18-2019, 11:35 AM
 
8,815 posts, read 5,119,154 times
Reputation: 10085
This isn't just money; these are service credits towards a pension. If you work for another employer with a pension, there may be reciprocity. Myself, I would not be in a hurry to permanently give up service credits. I would leave the money where it is for now.
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