GeoffT

Pension lump sum or not?

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Thinking of retiring soon.  I’ll be 65 in March but can starting collecting pension as of 9/1.  
 

Just talked to a financial rep on my options.   Does it make more sense to take the lump sum and roll it over to my 401K or an IRA to give me flexibility on investing? Or set up a permanent monthly income stream for life that can be passed to a beneficiary upon my death?

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Or set up a permanent monthly income stream for life that can be passed to a beneficiary upon my death?

Would this be effected by the stock market like a 401K & IRA?

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Tou have to weigh the size of the lump sum vs the monthly payment.

 

Without knowing, I think I would stick with the guaranteed annuity as a hedge against market fluctuations of your 401k. 

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permanent monthly income stream for life that can be passed to a beneficiary

I have a pension. I had to take less money to pay 'survivors benefit' for the wife to continue to collect my pension.  It depends on the age of the survivor, on the amount you have to pay for this benefit.

Edited by rdbass

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8 mins ago, Lagerhead said:

Tou have to weigh the size of the lump sum vs the monthly payment.

 

Without knowing, I think I would stick with the guaranteed annuity as a hedge against market fluctuations of your 401k. 

The lump sum is significant.  Would take 20 years of monthly payments.  
 

I was thinking if I play my cards right with investing the lump sum, I would gain much more than the monthly payments over twenty years. And be able to enjoy the money now cuz there’s no guarantee I’ll live that long. 

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1 min ago, GeoffT said:

The lump sum is significant.  Would take 20 years of monthly payments.  
 

I was thinking if I play my cards right with investing the lump sum, I would gain much more than the monthly payments over twenty years. And be able to enjoy the money now cuz there’s no guarantee I’ll live that long. 

Take your money now and you decide when you need funds .Tomorrow is promised to no man get your money in your hands as soon as you can .JMO

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I was thinking if I play my cards right with investing the lump sum, I would gain much more than the monthly payments over twenty years

I guess it depends if you're a gambler or not.....I'm not, I like to play it safe and know I have money coming every month. I have a wife so, that factored into my decision. Also, leaving her with paid medical was another factor.

Edited by rdbass

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Posted (edited) · Report post

You will be forced to withdraw a certain percentage when you reach 701/2 or some chit like that.

Just give it to me, i will open another checking account and the total will go over 2+ million.

:point:

Edited by CATCHnRELEASE

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Any tax liability on the lump sum opposed to the pension plan?

My wife made back her lump sum in less than 5 years because, taxes. 
20 years sounds like a long time. 

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45 mins ago, GeoffT said:

Thinking of retiring soon.  I’ll be 65 in March but can starting collecting pension as of 9/1.  
 

Just talked to a financial rep on my options.   Does it make more sense to take the lump sum and roll it over to my 401K or an IRA to give me flexibility on investing? Or set up a permanent monthly income stream for life that can be passed to a beneficiary upon my death?

Without seeing the plan documents and options it's impossible to say for sure.

 

However, the general rule of thumb is to roll the lump sum into a tax deferred account like an IRA.  The reason is the lump sum does not become taxable if you roll into an IRA account - only the withdrawals from that IRA are (ordinary income) taxable.  Once the lump is in the IRA, you have the universe of investment options to choose from the the most conservatiive to the most aggressive or a combination. The discount brokerages are free or nearly free now - I like Vanguard.  You very easily could replicate or exceed any of the annuity options that are currently offered within your pension and with a balanced investment allocation likely far exceed to ROR your pensions annuity option offers you.

 

That being said for most individuals I do NOT suggest purchasing an annuity in a tax deferred account like an IRA.  Also, you do not want to roll to your current 401k because then you are limited to that 401K's investment options and fees. In any IRA you elect a beneficiary the would receive the account upon your death.  Rolling to an IRA with a sensible investment allocation is likely your best bet.

Edited by Cpalms

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4 mins ago, CATCHnRELEASE said:

Of course there is a tax liability.

Your first inheritor is the governmemt.

I mean, you have not learned that yet?

She pays no taxes on her pension.

The lump sum would have been heavily taxed. 

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