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Should I take this Lump Sum?
Old 05-20-2013, 08:17 PM   #1
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Should I take this Lump Sum?

Not a large amount, but as part of my pension, I can give up $1,239.60 per year for a lump sum of $25,458. I am 52, so a couple questions:

1. Will I need to roll this into an IRA?
2. Is it still worth the penalty if I tap it early?

I think it still may be worth the penalty, and will keep a small amount available for an emergency fund.

Thanks for your comments!
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Old 05-20-2013, 08:34 PM   #2
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Is it a fixed (ie non-COLA)?
At what age does the $1,239.60 begin?

You don't have to roll it into and IRA, but you will then pay immediate tax on it.

You should especially consider rolling to an IRA if the additional $25,458 in income would push you into a higher tax bracket.

You can roll it into an IRA and still have some provisions to get access to it early without 10% penalty if you set up a 72(t) series of withdrawals.

-gauss
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Old 05-20-2013, 08:48 PM   #3
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It is a fixed (ie non-COLA)
The $1,239.60 starts at age 52, possibly in July if I pull the trigger.
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Old 05-20-2013, 08:54 PM   #4
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What are you going to do with $100 a month for the rest of your life?
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Old 05-20-2013, 09:01 PM   #5
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It would be a nice golfing budget
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Old 05-20-2013, 09:58 PM   #6
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Quote:
Originally Posted by 48Fire View Post
It would be a nice golfing budget
You have your answer. You're welcome.
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Old 05-20-2013, 10:03 PM   #7
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Not a large amount, but as part of my pension, I can give up $1,239.60 per year for a lump sum of $25,458....
What percentage of your pension is this? Small?

I usually vote against the lump sum but in this case I think I'd take it since it's 20 years of payments. You could probably grow it within your IRA to a nice little amount.
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Old 05-20-2013, 10:20 PM   #8
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It would be a nice golfing budget
I'm thinking more like a fishing budget! When I'm too old to fish, maybe I'll try golf...
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Old 05-21-2013, 04:19 AM   #9
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What percentage of your pension is this? Small?

I usually vote against the lump sum but in this case I think I'd take it since it's 20 years of payments. You could probably grow it within your IRA to a nice little amount.
Yes, very small, 2.8%. I agree with you on lump sum, but this caught my attention.
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Old 05-21-2013, 04:31 AM   #10
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You have your answer. You're welcome.
Thanks
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Old 05-21-2013, 10:16 AM   #11
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I know for myself, I'd get a lot more out of a $25k lump sum today, than I would $100 a month the rest of my life.

With $25k, I could set up an emergency fund, invest it, pay off a loan or debt, make a nice donation to charity, or if the money wasn't needed elsewhere treat it as "mad money" and buy something fun with it (not the best use of it, but still a use).

With $100 a month...I doubt I'd even notice it or could budget for it. It would be like it's not even there.
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Old 05-21-2013, 06:02 PM   #12
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I know for myself, I'd get a lot more out of a $25k lump sum today, than I would $100 a month the rest of my life.

With $25k, I could set up an emergency fund, invest it, pay off a loan or debt, make a nice donation to charity, or if the money wasn't needed elsewhere treat it as "mad money" and buy something fun with it (not the best use of it, but still a use).

With $100 a month...I doubt I'd even notice it or could budget for it. It would be like it's not even there.
I like that rationale a lot!! I was thinking similar thoughts, but it seemed a little wrong. I am leaning towards life is too short, and very uncertain. Thanks!
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