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Pension - What would you do?
Old 03-03-2010, 08:41 PM   #1
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Pension - What would you do?

Soon to be 55 yrs old and thinking about ER. Have a cash balance DB at work - balance about $125,000 (not much after 20+ years - shouldn't complain though since I realize DBs are rare in the private sector). Debating if I should roll it over into a TIRA (maybe the Wellesley fund) or take the NON- COLAED yearly stipend of approx $7800 (100% joint).

Some opinions or insights?

Thanks,
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Old 03-03-2010, 09:29 PM   #2
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Here is a thread that may help you decide....

What makes a pension a "good" pension
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Old 03-04-2010, 12:44 AM   #3
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Check to see if there are any other benefits attached to the pension. One possibility is some form of medical insurance that you might lose rolling to a TIRA.
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Old 03-04-2010, 01:25 AM   #4
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If there are no benefits linked to your pension other than the payments, the decision between taking the annuity or cashing out will depend a lot on your view of the future. One quick check is to see how much joint annuity you and your wife can buy for $125,000. Just go to Vanguard and get a quote. The insurance company (annuity underwriter) is likely a similar or better credit than your employer. Another approach is to realize that if you believe in Firecalc and the 4% rule, your $125,000 should give you $5000 annually, fully indexed for inflation. But IMO there is a lot of Kentucky windage in this figure. If you are worried about inflation you can discover what sort of indexed joint annuity you and your wife might buy for the $125,000. Lastly, I think TIPS are about 2 3/8 real now, so TIPS should give you a little less than $3000 per year, and you or your heirs will keep the inflation indexed principle.

A lot depends on your need for current cash, your ability or lack thereof to delay SS payments, and maybe most of all your expectations for inflation rates going forward.

Ha
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Old 03-04-2010, 10:31 AM   #5
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I love having a pension of about the same size, though mine is from the federal government so there is minimal risk of default. Is your company stable?

I guess the PBGC would step in if there was a problem, but I wouldn't want to have to hassle with that so I think that is a factor to consider as well.
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Old 03-04-2010, 01:21 PM   #6
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It appears that the $7,800 is in the ballpark for an annuity, however interest rates are at all time lows. VWINX would currently kick off a little over 5K with no future income guarantee but could produce long term gains and may stay up with inflation. Take your pick.
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