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Help Needed with Pension decision , thanks .
Old 08-03-2018, 10:27 AM   #1
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Help Needed with Pension decision , thanks .

Hi everyone

I'm 60 and will be 61 this coming November . I had to retire early (July 12th 2018) due to medical issues , currently in process of applying for SSDI. Medical condition isn't life threatening, but it's bad enough where I'm not able to work any longer



I have a pension currently at $350,000

It was a little over $400,000 but when rates changed it dipped .I don't understand how the GATT (?) affects my pension ,all I know is when rates are raised, my pension loses money.


If I take monthly payments it's around $1800


Thing is ,on my Fathers side life expectancy is around 80 years old or a few more.

On my Mothers side it's 65 and most of my siblings have passed away in 60's (4) and 1 at 83


So I figured I take the lump sum due to life expectancy odds.

My question is, where should I put my pension lump sum in order to pay the least amount of taxes , where I'm able to draw monthly funds to cover monthly needs to pay bills /food/co-op maintenance ?



PS: I also have a 401K currently worth $420,000 (Fidelity) which I haven't touched . I currently only have enough cash on hand to make ends meet for the next 8 months .

Thanks so much.
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Old 08-03-2018, 11:21 AM   #2
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If you roll your lump sum into a tIRA then taking the lump sum is NOT a taxable event. You get taxed on it when you withdraw funds from the tIRA and you can control that.

Same thing with your 401k.

If you do it right (and what most people do) you only get taxed when you take money out.
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Old 08-03-2018, 11:36 AM   #3
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pb4uski ,


First off.... thanks for the reply !

What's the difference between a tIRA and an IRA ….is tIRA (Traditional ?)


Also,I trade stocks (not with fidelity ) and in and out several times day.

So will I be able to still trade stocks in this tIRA with fidelity ,if pension is moved to an tIRA?

Thanks again.


Quote:
Originally Posted by pb4uski View Post
If you roll your lump sum into a tIRA then taking the lump sum is NOT a taxable event. You get taxed on it when you withdraw funds from the tIRA and you can control that.

Same thing with your 401k.

If you do it right (and what most people do) you only get taxed when you take money out.
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Old 08-03-2018, 11:42 AM   #4
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Regarding the pension options. Are you married, and if so, what would the options be for the monthly payment being provided for life for both of you. If it was still 1800/month, and she has a longer life expectancy, that factors in. Also, is there a COLA built into that payment? These items may impact the decision.

1800/month on 350,000 is a cash flow of 5.15%, which is better than one can get with purchased annuities if there is any type of yearly COLA for the pension. You would have a fixed guaranteed income, and still have your 401K to invest or draw from.

Just thoughts.
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Old 08-03-2018, 12:11 PM   #5
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Originally Posted by sdawson View Post
Regarding the pension options. Are you married, and if so, what would the options be for the monthly payment being provided for life for both of you. If it was still 1800/month, and she has a longer life expectancy, that factors in. Also, is there a COLA built into that payment? These items may impact the decision.

1800/month on 350,000 is a cash flow of 5.15%, which is better than one can get with purchased annuities if there is any type of yearly COLA for the pension. You would have a fixed guaranteed income, and still have your 401K to invest or draw from.

Just thoughts.
Thanks for the additional thoughts,much appreciated .

Just me,not married now.


It's a private company and the way pensions are failing all over the country, I'm very hesitant to take monthly payment of $1800,especially with my families life expectancy .

It's very tempting to take the guaranteed $1800 ,but for me there's a downside (pension failure/life expectancy)

I didn't look into COLA, because I was kind of set in taking lump sum.

My monthly living expenses are no more than $1500 a month, which includes bills/health insurance /co-op maintenance .

I own co-op (paid off )which I can easily sell for $400,000 here in NYC.

Thanks.
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Old 08-03-2018, 12:18 PM   #6
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............Also,I trade stocks (not with fidelity ) and in and out several times day...........
Unless this is a small hobby, I'd knock this off and just invest your money in index funds. Over the long term it is going to lose you money.
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Old 08-03-2018, 12:28 PM   #7
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I really don’t care for pensions or any other entity holding my money, I had to google bird in hand just to refresh my memory

Definition of a bird in the hand is worth two in the bush. —used to say that it is better to hold onto something one has than to risk losing it by trying to get something better.
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Old 08-03-2018, 12:35 PM   #8
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Unless this is a small hobby, I'd knock this off and just invest your money in index funds. Over the long term it is going to lose you money.
I've been trading for quite a while off and on for almost 20 years and I never get greedy.I just look to make a $100 to $300 a day and now that I'm not able to work I can devote more time. I'm always flat EOD (don't hold anything overnight ) and have a set up with live data /charts/scanners/DOM etc..

I enjoy it and I'm very good at it.
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Old 08-03-2018, 12:58 PM   #9
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Sorry to hear you were forced to retire due to health but glad that you have the resources to do so.

You might consider finding a financial advisor that you pay by the hour to evaluate your options and make some recommendations for your funds.

Are you getting disability insurance payments now or living off your savings pending SSDI? It can take quite a while for SSDI approval, especially if you don't have an insurer helping with all of the paperwork.
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Old 08-03-2018, 01:03 PM   #10
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Originally Posted by BlueRain View Post
I've been trading for quite a while off and on for almost 20 years and I never get greedy.I just look to make a $100 to $300 a day and now that I'm not able to work I can devote more time. I'm always flat EOD (don't hold anything overnight ) and have a set up with live data /charts/scanners/DOM etc..

I enjoy it and I'm very good at it.
That's impressive. If you average, say, $150 a day, that is $55,000 a year.
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Old 08-03-2018, 01:06 PM   #11
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Wow -- I certainly would think twice before considering cashing out a pension like that short of having serious health problems that could not be reversed.

If you are afraid for your pension due to media reports, I suggest you dig deeper into the details of your real risks. Assuming that this is a private pension, I would assume that it is ERISA qualified. This implies under current law that the PBGC will ensure your pension, up to limits, in the case of failure of the sponsoring company. You don't sound very sophisticated financially so I would not see you as a candidate to self-manage all of your retirement funds (ie cashed out pension AND 401ks).

Realize that there is much bias out there suggesting for people it is smart to cash out pensions. Realize that the financial industry has a huge interest in motivating this type of behavior and that it will likely be to your determent.

I have mentioned this before, and it is anecdotal, but the only folks I know who had a hard time in retirement financially were those 2 individuals who had perfectly good DB private company pensions that were cashed out and funds then managed by a "Financial Advisory". Funds were lost and the people are hurting now (think residing in subsided housing). The pension funds have continued to make payments like clockwork.

-gauss
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Old 08-03-2018, 01:15 PM   #12
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Your bills will increase yearly. A non-cola'd pension stays fixed. Very shortly, the expenses will exceed the pension. Immediateannuities.com says 1770/mo lifetime annuity for a 60 yr old male in NY. Pretty close to your "around $1800".

You mention you are "not married now". If you ever do get married and you take the basic pension or annuity, and die on your wedding night, there will be nothing left for your spouse. Something to think about.

Just like "past performance does not guarantee future results" you family's life span does not guarantee you will pass early. I would want to be prepared for the longer lie expectancy. 4% WR of 350,000 is 1167/mo. That (or 3.5% if you prefer) would allow for both future COLA increases and for a spousal benefit should you pass earlier. See if your budget can work with those numbers.


I am a belts and suspenders kinda guy. I took my pension money for the reasons above and rolled it into my IRA's. Further, I annuitized a LI policy and took a single life annuity with 10 yrs certain because that policy is small and covers only a couple of nights out for dinner a month for us. Had we to rely on it, I would have done the 2-life payout.


Tough choices to make. You are getting some good insight. In the end, only you can make the final decision.
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Old 08-03-2018, 01:44 PM   #13
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Sorry to hear you were forced to retire due to health but glad that you have the resources to do so.

You might consider finding a financial advisor that you pay by the hour to evaluate your options and make some recommendations for your funds.

Are you getting disability insurance payments now or living off your savings pending SSDI? It can take quite a while for SSDI approval, especially if you don't have an insurer helping with all of the paperwork.

Yes ,I'm grateful I have the resources to keep a roof over my head and live in a nice area.

I had an appointment with a financial advisor from fidelity (my 401k is with them ,so I guess they really want me to park my pension there too. I amazed how many financial institutions are sending me mail) but had to cancel due to doc appointment ,they fitted me in even tho they were fully booked,so I had to cancel appt with financial advisor from fidelity. I will reschedule . (Fidelity actually called me while posting this )


I didn't start saving until I was 40yo,very foolish of me,but I have zero debt and managed to save $400,000 plus in my 401k in the last 20 years by me constantly managing my own 401k with the 19 choices we had.

I'm living off my savings now pending SSDI. I wasn't aware I could've applied at the 6 month while out sick.

I cut all ties with my job,too stressful dealing with them with doc appts and medical notes. I was on short term disability for a year,and last 3 months were half pay. I could've done the long term disability (half pay)but the red tape was too stressful and the benefit /including SSDI (if ok'd) wasn't worth the stress for a few extra hundred a month .Peace of mind is more important to me.

Thanks.
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Old 08-03-2018, 02:26 PM   #14
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Originally Posted by gauss View Post
Wow -- I certainly would think twice before considering cashing out a pension like that short of having serious health problems that could not be reversed.

If you are afraid for your pension due to media reports, I suggest you dig deeper into the details of your real risks. Assuming that this is a private pension, I would assume that it is ERISA qualified. This implies under current law that the PBGC will ensure your pension, up to limits, in the case of failure of the sponsoring company. You don't sound very sophisticated financially so I would not see you as a candidate to self-manage all of your retirement funds (ie cashed out pension AND 401ks).

Realize that there is much bias out there suggesting for people it is smart to cash out pensions. Realize that the financial industry has a huge interest in motivating this type of behavior and that it will likely be to your determent.

I have mentioned this before, and it is anecdotal, but the only folks I know who had a hard time in retirement financially were those 2 individuals who had perfectly good DB private company pensions that were cashed out and funds then managed by a "Financial Advisory". Funds were lost and the people are hurting now (think residing in subsided housing). The pension funds have continued to make payments like clockwork.

-gauss


Hi qauss.

Yes it's a private pension . I'm concerned about monthly payments being reduced if company goes bankrupt ,look what happened to ENRON,Worldcom,didn't they lose everything ?

I'm very savvy when it comes to the economy ,markets and trading ,but not where to park money in order to pay least amount of taxes with pension.

Never looked into it because I had no intention of retiring early.Now I'm cramming due to time constrictions.

Yes I'm aware the financial industry has a huge interest in motivating people to take lump sum. If I do take lump sum ,I will not allow funds to be managed by a "Financial Advisory", NEVER. I'm very very very good at managing myself due to my market knowledge .

I'm just not good at the tax thing.




I haven't touch my 401k plus I'm over 59 1/2 (60) so no penalty ,but I'm not withdrawing any $,just managing it myself.


PS:Still torn over lump sum or monthly payments .
Thanks.
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Old 08-03-2018, 02:45 PM   #15
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That's impressive. If you average, say, $150 a day, that is $55,000 a year.
Greed is the destroyer of the majority of traders ,they're never happy with a piece of the pie ,they look to grab entire move which is why they are in the red.

A stock will drop in a split second and bypass their entry and now they're either chasing to sell or holding hoping it bounces back, and that could take weeks,months or more. So now their stock is in the red and locked up because they're waiting for that bounce in order to recoup their losses.

I take a small bite ,and never look back ,I leave a lot of $ on the table but I don't care. In and out same day and never hold overnight .
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Old 08-03-2018, 03:23 PM   #16
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Your bills will increase yearly. A non-cola'd pension stays fixed. Very shortly, the expenses will exceed the pension. Immediateannuities.com says 1770/mo lifetime annuity for a 60 yr old male in NY. Pretty close to your "around $1800".

You mention you are "not married now". If you ever do get married and you take the basic pension or annuity, and die on your wedding night, there will be nothing left for your spouse. Something to think about.

Just like "past performance does not guarantee future results" you family's life span does not guarantee you will pass early. I would want to be prepared for the longer lie expectancy. 4% WR of 350,000 is 1167/mo. That (or 3.5% if you prefer) would allow for both future COLA increases and for a spousal benefit should you pass earlier. See if your budget can work with those numbers.


I am a belts and suspenders kinda guy. I took my pension money for the reasons above and rolled it into my IRA's. Further, I annuitized a LI policy and took a single life annuity with 10 yrs certain because that policy is small and covers only a couple of nights out for dinner a month for us. Had we to rely on it, I would have done the 2-life payout.


Tough choices to make. You are getting some good insight. In the end, only you can make the final decision.
Tough choices indeed.



I'm a female and own my co-op paid in full and my boyfriend does very well (much better than me )and owns his own house. I don't want any or need his money and he doesn't need mine. We both have wills to our own families and no need to change things, besides, his kids deserve what he's saved and the same for me with my family.

Marriage will complicate things among families if one us or both of us should pass.

I have to find out if my pension has COLA before final decision .

Thanks so much for your input ,much appreciated .
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Old 08-03-2018, 03:45 PM   #17
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That's impressive. If you average, say, $150 a day, that is $55,000 a year.
Actually it's less due to on average there's about 252 trading days a year and short term capital gains. Still good enough for me ,plus many days it's much more if ya catch a runner.
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Old 08-03-2018, 04:01 PM   #18
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I decided back in 2011 to roll my pension (much smaller than yours and non-cola) into the Wellesley fund. A conservative fund which has been around since 1971. Not doing well this year because it approx. 60% bonds but it's only had 2 losing years since 1971. I call it my singles/doubles" fund (rarely hits a home run). Historically it averaged just short of 7% per year and has a low expense ratio.


It's a pretty popular fund in this forum.
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Old 08-03-2018, 04:21 PM   #19
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I decided back in 2011 to roll my pension (much smaller than yours and non-cola) into the Wellesley fund. A conservative fund which has been around since 1971. Not doing well this year because it approx. 60% bonds but it's only had 2 losing years since 1971. I call it my singles/doubles" fund (rarely hits a home run). Historically it averaged just short of 7% per year and has a low expense ratio.



It's a pretty popular fund in this forum.

Hi,

Last 10-15 years I constantly moved things around in my 401k to aggressive growth and small cap (took a hit during mortgage crisis but it recovered and then some ) .

This last year was the best.

Now that I'm retired ,I definitely have to switch to conservative fund for sure.

I'll look into this Wellesley fund .

Thanks.
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