Single sum pension cash out or not?

[Tornado]

Looking for some opinions. My former employer is offering a single sum cash payout vs waiting 13 more years to begin taking normal monthly pension amount. I don't "need" the money today, so if I did take the lump sum pay out I would roll the full amount to an IRA. I do have additional savings for retirement but not near the levels suggested. Cash out and invest or take the sure thing.....comments?

[dbussone]

Looking for some opinions. My former employer is offering a single sum cash payout vs waiting 13 more years to begin taking normal monthly pension amount. I don't "need" the money today, so if I did take the lump sum pay out I would roll the full amount to an IRA. I do have additional savings for retirement but not near the levels suggested. Cash out and invest or take the sure thing.....comments?


Although there are some very sharp people on TOTV, I would suggest you seek a financial professional who can fully evaluate your needs and financial circumstances. Best regards for a successful outcome.

[Doctor Who]

Sure thing? What does that mean?

[Yung Dum]

I believe Enron was considered a sure thing. I'd rather lose my money in bad investments than having it stolen by a millionaire with a golden parachute.

[JoMar]

I prefer to be in control of my money rather than let an unknown administrator be in control. My wife and I both retired and took the money. I agree with dbussone, get a professional investment person and he shuld be able to take very good care of your money at your direction.

[rjm1cc]

Might give the dollar amount now and the payout terms.

[jnieman]

I cashed mine out when I left my co and rolled it to an IRA. The co wasn't funding the pension plans fully and it made me nervous. By doing this it may disqualify u from getting any other retirement benefits that may be offered like health ins just a guess on that.

[rubicon]

You may need a professional. However you need to compare your fixed annuity payments vis a vis what you can return if you took a lump sum. essentially your comparing present value ( lump sum) with future value (annuity) and deciding what will give you the greatest return. also remember there are various payouts 100%, 75% 50% that will be split between spouses. In my case I took a lump sum and invested it and it has done very well and hence so far worked for me

[tcxr750]

My experience with the lump sum is that you better do a lot of research on what to do with the money and who you give it to to"manage" it.
I had the excitement of the "tech bubble", "rising interest rates" and the "Great Subprime Mortgage Crash of 08". Add in an advisor who did market timing with mutual funds and a few others that I won't enumerate on. Even being on "Barron's Top 100 list" does not guaranty an advisor's portfolio performance. It is nice to have that $$$ to pass on to your heirs. However, a monthly pension check in the mail makes it easier to sleep at night.
All that said, I still have more money that I started with 15 years ago. I have also been able to make withdrawals for the past 10 years at the suggested 4% rate to supplement my other retirement sources. Be aware of costs and fees from an advisor than can affect the long term value of your portfolio.
There should be a large number of people in TV that can share their real world investment experiences.

[RayinPenn]

This is a no brainier...
1. Google transparent investing and read the article the whole story
2. Take the payout and invest the money accordingly
3. Avoid financial planners - many will smile and put you in high commission investments not suited to your needs.

[TNLAKEPANDA]

Most advisors will tell you not to leave the money with your company. Take control ASAP.

[pbkmaine]

That's because many advisors charge you a percentage of the money they manage. My husband's pension is fully funded. The present value of his pension payouts was far greater than the present value of the invested lump sum using a 4% withdrawal rate assumption. We took the 75% joint and survivor annuity. Yes, there is a possibility that someday in the misty future his company will renege on the pension. If so, his pension will be reduced by the PBGC. We figured that into the equation. The pension payout still won.

[tommy steam]

I would look for a fee only financial advisor with this question. Every person is different and I don't think there is a perfect answer.

[gustavo]

You need to evaluate if the lump sum payment could buy an immediate annuity equal to or greater than the monthly annuity offered by the company. Usually the lump sum is the inferior choice unless the company is trying to alleviate pension burden. Call Fidelity and see what $100k will buy you in a lifetime annuity, scale it by your company's offer and compare it with your pension offer.

The company stability risk is another matter that would probably drive you to accept a 5%, 10% or even more of a reduction in the lump sum amount based on your assessment of the company's stability. Although pensions are gauranteed by some federal law/insurance IIRC.

[Madelaine Amee]

That's because many advisors charge you a percentage of the money they manage. My husband's pension is fully funded. The present value of his pension payouts was far greater than the present value of the invested lump sum using a 4% withdrawal rate assumption. We took the 75% joint and survivor annuity. Yes, there is a possibility that someday in the misty future his company will renege on the pension. If so, his pension will be reduced by the PBGC. We figured that into the equation. The pension payout still won.

Excellent post. We took the pension monthly payout, works fine for us.
The PBGC did have to take over our pension some years ago and they pay out every month. We are not risk takers, and having already lost an enormous amount of money in the market during the down time, we no longer would feel safe risking a guaranteed pension. We also transferred what was left of our stocks into a fixed income plan, which also works great for us.

As they say, to each his own. Only you can know your comfort level and how much risk you are prepared to take on.

[TNLAKEPANDA]

The main thing is do your homework and own research so you and make an informed decision.

[scroll]

pkbmaine did it right. get good advice that makes logical sense. keep emotions out of it and expect the unexpected if you are taking control ie how to make up for loss years etc.

[collie1228]

The best advice is to get good advice. Let me suggest you also make sure the advice you get is in your own best interest. Currently there are two standards that financial planners are held to - the suitability standard and the fiduciary standard. Do some research and fully understand the difference. Then make sure your advisor is a fiduciary and is willing to put it in writing. A fiduciary must always put your interest ahead of his own, and will never sell you an investment product for the sake of lining his own pocket.

[rjm1cc]

Does the value increase each year or is it frozen?

[tcxr750]

I had my retirement lump with several Advisor's on the Barron's top 100 list. As for "Fiduciary Responsiblity" it looks good on paper but when you have losses based on your Advisor's lack thereof, the rude awakening comes when you can't find a lawyer to take the case unless there is a dollar amount followed by at least 6 0's. Can you say REIT?

[Tornado]

The value is frozen and will not increase.

Thanks to everyone for your feedback!!

[rjm1cc]

The value is frozen and will not increase.

Thanks to everyone for your feedback!!

Then roll to an IRA. If you are not sure about investments get a target dated mutual fund or stock marker index fund.