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where to withdraw money 401K or Pension?
Old 04-06-2016, 09:10 AM   #1
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where to withdraw money 401K or Pension?



I am 53 years old and longevity is probably not in my cards since I suffer from an auto immune disorder that lowers the white blood cells to around 2.0 versus a minimum 3.7. One side effect is that for most germs the incubation period is days while for me is hours. Anyway, I am about to start withdrawing money, and I have 2 possible options which I need your help.
Option 1 is using rule 72T which provides 110% of the money that I need based on 72T rule calculator.

Option 2 is taking a pension plan that has a few interesting options:
A. A. Life annuity with 100% joint survivor
B. B. Level 2 income to age 62 with 100% joint survivor
C. C.20 years certain & life

If I take the pension plan option, this will allow the 401K to grow a little more. I am considering B option which will provide ~ 120% of the money that I need while A, C options provide only 70% of the money. I can make up the difference with after tax money and can also trim some of the expenses to make things easier on the wallet.

I do appreciate your comments or suggestions,

Speedy


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Old 04-06-2016, 09:56 AM   #2
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Are you married? If so, how old is your spouse and is s/he healthy?

If you are married, then you need to make the decision based on joint longevity, not just yours.
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Old 04-06-2016, 10:12 AM   #3
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Yes, I am marry wife is 10 years older than me. She actually has no need for this money since her pension plan, 401K is much bigger than mine. We have always kept our savings and investment plans separate.
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Old 04-06-2016, 11:20 AM   #4
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Yes, I am marry wife is 10 years older than me. She actually has no need for this money since her pension plan, 401K is much bigger than mine. We have always kept our savings and investment plans separate.
So if your wife has a larger pension and 401k than you, why worry about a pension option with 100% survivor? For my pension, the single life option is about 20% larger than the 100% survivor option.

In answer to your first question, I'd take the pension to cover my expenses, and draw on the 401k money as needed for unplanned expenses, special occasions, travel, etc.
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Old 04-06-2016, 11:35 AM   #5
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So if your wife has a larger pension and 401k than you, why worry about a pension option with 100% survivor? For my pension, the single life option is about 20% larger than the 100% survivor option.

In my case, the difference is a lot, a lot smaller that your 20% probably around 5%. It is possible that is due to my wife been older than me and still working.

I like the survivor option because the money will be their to help my son pay his student loans, and help some relatives back home. My wife does the same with her family and does why the accounts are kept separate.
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Old 04-06-2016, 11:41 AM   #6
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Yes, I am marry wife is 10 years older than me. She actually has no need for this money since her pension plan, 401K is much bigger than mine. We have always kept our savings and investment plans separate.
You didn't provide numbers at all, so even though hers may be bigger than yours, it may still be not quite enough.

You also didn't say how long your 410K would last doing the 72T

You didn't list your current expenses vs current income and projected income.

Since your wife is 63, is she waiting to take SS or has she already taken the reduced rate (women live long, so it is better for them to wait on SS as long as possible).

What are you going to do if you are "unlucky" enough to live another 25 years ?
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Old 04-06-2016, 11:46 AM   #7
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....
If I take the pension plan option, this will allow the 401K to grow a little more. ....
I understand you have both a pension and a 410K ?

Because if it's the same money, then when you take a pension instead of lumpsum, the 401K does not grow, there is nothing there to grow as it is now a pension.
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Old 04-06-2016, 12:23 PM   #8
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The 401K is from previous employer and is currently invested in a 2015 target fund.

I am also doing a rollover into an IRA.
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Old 04-06-2016, 12:38 PM   #9
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You didn't provide numbers at all, so even though hers may be bigger than yours, it may still be not quite enough.

You also didn't say how long your 410K would last doing the 72T

If the money earns a zero return and payments are not adjusted for inflation, the money gets to zero 32 years.

You didn't list your current expenses vs current income and projected income.

The expenses are going to be small, the only fixed costs for my home are property taxes and water bill. These 2 items cost me 60 dollars per year back home.

Since your wife is 63, is she waiting to take SS or has she already taken the reduced rate (women live long, so it is better for them to wait on SS as long as possible).

Wife still working and will like to continue working for 2-3 more years. This will put her on 65-66 years which is full retirement age.

What are you going to do if you are "unlucky" enough to live another 25 years ?

The odds are against me because my immune problem.
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Old 04-06-2016, 01:19 PM   #10
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All of the options you listed have pros and cons and there is absolutely no way to know how things will work out regardless of which you choose due to not knowing how long either you or you wife will live and the sketchiness of the info you provided.

You seem to be driven by the fact that you think you have a short life expectancy from here. Therefore your plan should take that into consideration in regard to both meeting your responsibilities and enjoying the balance of your life.

At the same time, you need flexibility. While you think you'll predecease your DW, that isn't necessarily the case. Based on your inputs, it's entirely possible she may pass tomorrow, say in a car accident, and you'll go on for another 20 years. Your plan must have a viable path for dealing with those kind of issues.

Don't count too much on your outcome being "average" or "typical" for your current health and family status. One never knows and flexibility is key.
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Old 04-06-2016, 03:10 PM   #11
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Are you considered disabled because of your medical condition? That could change the need to do a 72T. How much is your pension being reduced by taking it at 53 instead of 62?
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Old 04-06-2016, 03:30 PM   #12
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I am not even sure if my condition can be classify as a disability. The wife just calls me Sponge Bob because I pick anything like a sponge.

Not sure what the difference is on the pension if I wait until full retirement age. I was just going by a letter that I got from the plan asking me if I wanted to start the plan.
I am going to look into this.
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Old 04-07-2016, 10:16 AM   #13
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If you are disabled you would be exempt from the 10% penalty for early withdrawals. Also be eligible for SSDI and eligible for Medicare in 2 years.
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Old 04-07-2016, 12:34 PM   #14
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If you are disabled you would be exempt from the 10% penalty for early withdrawals. Also be eligible for SSDI and eligible for Medicare in 2 years.

Thanks for this info, I'll look into it!
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