|
Calculator for Lump sum payout?
12-26-2009, 01:26 PM
|
#1
|
Confused about dryer sheets
Join Date: Dec 2009
Location: Jacksonville
Posts: 8
|
Calculator for Lump sum payout?
Greetings .... I am trying to find out which would be a better option .... A retirement payout of 6624.00/month....
or a lump sum of about 365000.00 and 5883.00/month ?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
12-26-2009, 01:43 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Mar 2007
Posts: 1,860
|
Quote:
Originally Posted by offthefront
Greetings .... I am trying to find out which would be a better option .... A retirement payout of 6624.00/month....
or a lump sum of about 365000.00 and 5883.00/month ?
|
What is your life expectancy? that's an important factor in the calculation. How many years do you expect to get the monthly payment in each scenario?
|
|
|
12-26-2009, 01:52 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
|
Welcome to the forum.
I'm not aware of any lump sum vs. monthly benefit calculator other than using something like this to determine the monthly benefit you could expect if you used the lump sum to buy an immediate annuity. That should give you an idea if the $741 per month reduction is reasonable.
__________________
Numbers is hard
|
|
|
12-26-2009, 02:00 PM
|
#4
|
Recycles dryer sheets
Join Date: Nov 2009
Posts: 67
|
I would definitely take the combination lump sum + monthly. Here's why.
Your annual payout is reduced is by 12*(6624-5883)=$8,892/year.
Your $365,000 lump sum can be invested at only 2.43% return to make up the loss in annual payout (8,892/365,0002.43%). If your pension has a COLA, you'd need to keep up with inflation but I would be willing to risk that.
You also have the advantage of spreading your risk. Should the pension fund run into problems, you have a chunk of cash.
And, congratulations on having a GREAT pension!
Steve
|
|
|
12-26-2009, 02:03 PM
|
#5
|
Recycles dryer sheets
Join Date: Jan 2008
Posts: 397
|
Quote:
Originally Posted by offthefront
Greetings .... I am trying to find out which would be a better option .... A retirement payout of 6624.00/month....
or a lump sum of about 365000.00 and 5883.00/month ?
|
I would take the $365000 and 5883 a month and you could replace the 741 a month if you only got 2.43% interest and keep the principal.
Seems a no brainer to me.
|
|
|
12-26-2009, 03:42 PM
|
#6
|
Confused about dryer sheets
Join Date: Dec 2009
Location: Jacksonville
Posts: 8
|
Quote:
Originally Posted by Finance Dave
What is your life expectancy? that's an important factor in the calculation. How many years do you expect to get the monthly payment in each scenario?
|
Sorry More info ..... Both amounts would be for life ...Both should have a 3% Cola begining on the 5th year ..... Also if it matters I can Defer the lumpsum into my 401K (357b) account ....I am 56 now no reason right now not to have a normal life expectancy ...Both parents are in their 80's (87,85) ..... The earliest this can happen will be Oct 2010 ... Thanks for all th feedback .....mike ....
|
|
|
12-26-2009, 05:58 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2009
Posts: 5,308
|
I would take the lump sum as much since there is always a financial risk in a pension of it going under and who knows if the pension guaranty fund will always be there.
|
|
|
12-26-2009, 07:33 PM
|
#8
|
Full time employment: Posting here.
Join Date: Jul 2005
Posts: 987
|
Quote:
Originally Posted by offthefront
Also if it matters I can Defer the lumpsum into my 401K (357b) account .....
|
It matters. You need to roll it into something. unless you want to pay taxes on the entire lump sum distribution. Make sure it is rolled directly. If you accept a check, they will withhold a bunch, and you will have to make up the withholding until tax time if you want to roll the entire amount. A direct rollover (i.e. you never lay hands on a check) avoid this. Any major brokerage (Fidelity, Schwab, Vanguard, etc.) would be only too happy to help you and deal with most of the paperwork.
__________________
I have an inferiority complex, but it's not a very good one.
|
|
|
12-27-2009, 06:38 AM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,327
|
The lump sum with partial pension sounds like the much better deal. Another factor you didn't mention is survivorship. Are you married? Does the pension component have a 100% survivor transfer to your spouse? The lump sum will.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
|
|
|
12-27-2009, 08:48 AM
|
#10
|
Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
|
Just taking a quick look at it, I'd take the combo deal. Wouldn't leave all the eggs in one basket.
|
|
|
12-27-2009, 08:55 AM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
|
Cash always comes in handy for life's little emergency's and of course toys.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
|
|
|
12-30-2009, 06:10 AM
|
#12
|
Recycles dryer sheets
Join Date: Dec 2009
Posts: 215
|
Quote:
Originally Posted by Katsmeow
I would take the lump sum as much since there is always a financial risk in a pension of it going under and who knows if the pension guaranty fund will always be there.
|
Not to mention, PBGC has a cap on pensions replaced and it looks like you are way over the cap!
Wow nice pension!
|
|
|
12-30-2009, 06:47 AM
|
#13
|
Thinks s/he gets paid by the post
Join Date: Dec 2005
Location: Lake Livingston, Tx
Posts: 4,204
|
For what it is worth, my trusty HP 12c says,
34 yeas (90-56)
6% interest
If you look at future values
first option 8,812,061
second option 10,619,182
So it appears that the second option is the best
__________________
If it is after 5:00 when I post I reserve the right to disavow anything I posted.
|
|
|
12-30-2009, 08:41 AM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Oct 2006
Posts: 4,629
|
The 3% automatic increases (assuming they continue forever) are significant. They turn the no-brainer into something that requires at least a little thought.
However, I'd still go for the lump sum because it spreads my risks and gives me flexibility. From an investment perspective, the $70k remaining pension (plus, eventually, SS) more than covers my basic expenses, so I could invest the lump sum pretty aggressively and do a "percent of current balance" withdrawal strategy.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|