biocruiser
Confused about dryer sheets
- Joined
- Mar 5, 2008
- Messages
- 6
I am new to this forum, been reading a lot and still have questions about whether take a lump sum or annuity from my company.
The numbers. I am 56, wife 56 and I am about to retire. The company I work for (Megacorp) offers a “cash balance pension plan”. The cash balance is $676,111 which I can roll into an IRA. If I take an annuity starting April 2012, the single life annuity would be 3,684/month and 100% Joint and Survivor would be 3,380/month. No COLA. This seems like a decent payout, with single life annual payout at 6.54% of lump sum value.
What I’m confused about is how to weigh all the other factors. Here are some factors I can think of, but I am probably missing others.
Longevity. We are in good health and longevity runs in my family and in my wife’s family. This would favor annuity.
Annuity risk. Megacorp is in an industry rife with mergers and acquisitions. Megacorp may proper and acquire other companies, but an equally possible scenario is that things will go poorly and Megacorp and will have to merge or be acquired. What happens to the annuity if the company gets acquired? How do I determine the funding level and risk of losing all or part of the annuity?
Portfolio size. I have a decent portfolio including 401k, deferred comp and a taxable account. Adding the lump sum would create a portfolio large enough to retire on using a 3.5% SWR to meet required expenses. Does this scenario favor lump sum or annuity?
Taxes. If I start taking the annuity now then I have to pay taxes on that money now. I don’t need a pension now as I have other assets to live on. So that would seem to point to rolling over lump sum into IRA, correct?
Any advice or other factors I should consider?
The numbers. I am 56, wife 56 and I am about to retire. The company I work for (Megacorp) offers a “cash balance pension plan”. The cash balance is $676,111 which I can roll into an IRA. If I take an annuity starting April 2012, the single life annuity would be 3,684/month and 100% Joint and Survivor would be 3,380/month. No COLA. This seems like a decent payout, with single life annual payout at 6.54% of lump sum value.
What I’m confused about is how to weigh all the other factors. Here are some factors I can think of, but I am probably missing others.
Longevity. We are in good health and longevity runs in my family and in my wife’s family. This would favor annuity.
Annuity risk. Megacorp is in an industry rife with mergers and acquisitions. Megacorp may proper and acquire other companies, but an equally possible scenario is that things will go poorly and Megacorp and will have to merge or be acquired. What happens to the annuity if the company gets acquired? How do I determine the funding level and risk of losing all or part of the annuity?
Portfolio size. I have a decent portfolio including 401k, deferred comp and a taxable account. Adding the lump sum would create a portfolio large enough to retire on using a 3.5% SWR to meet required expenses. Does this scenario favor lump sum or annuity?
Taxes. If I start taking the annuity now then I have to pay taxes on that money now. I don’t need a pension now as I have other assets to live on. So that would seem to point to rolling over lump sum into IRA, correct?
Any advice or other factors I should consider?