If you take the cash from the pension plan and do not roll over the money, you will be subject to a significant tax bill. With regard to the fact that you would receive 100% of the pension benefit each month and 50% of the pension benefit would be paid to your spouse upon your death, you should check to see if there are other pension benefit options. The benefit you describe is a 50% Joint & Survivor option. Many plans offer other options including 75% Joint and Survivor option and 100% Joint and Survivor option.
What does it mean? If your monthly pension benefit is $2,000 given the 50% Joint and Survivor option as you describe, then the 75% Joint and Survivor pension option would provide you with a monthly pension benefit of less than $2,000 but upon your death, your spouse would receive 75% of the pension benefit. If the pension plan offers a 100% Joint and Survivor pension option, your monthly pension benefit would be less than $2,000 per month, however your spouse would continue to receive the same pension benefit until your death.
For example, I am only providing numbers without any reference to your pension plan -- it is only meant to be an explanation of the options. The 50% Joint and Survivor option: you receive $2,000 per month and spouse receives $1,000 upon your death. The 75% Joint and Survivor option: you receive $1,900 per month and your spouse receives 75% of the $1,900 or $1,425 per month upon your death. The 100% Joint and Survivor option: you receive $1,750 per month and your spouse continues to receive $1,750 per month upon your death.
Also, does the pension plan offer a cost-of-living adjustment each year? While many pension plan no longer offer a cost-of-living adjustment, you should ask the question. For those plans that do offer a cost-of-living adjustment, the percentage may be low and you may think it is insignificant, however after five or ten years it makes a difference in your monthly pension benefit.
I would check with a person with a financial or tax background before making a decision. Also, does the company offer any seminars in which they bring in people such as the administrator of the 401(k) plan? If yes, you should attend.
A pension check deposited in your bank account is much easier than being a landlord. Please check all of your options before making a decision. You need to take your time to understand the financial impact of your decisions.
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