Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Roll-over or annuity
Old 04-28-2013, 10:24 AM   #1
Full time employment: Posting here.
Join Date: Apr 2010
Posts: 570
Roll-over or annuity

My DW will be eligible for a small pension at the year end.

The lump-sum would be ~59K.
She would have an option to roll-over it or take a monthly payments, e.g. monthly 100% Join and Survivor would be $261. The amounts are not COLA adjusted.

Another option is to wait 10 years, then the lump-sum would be ~83K and monthly 100% Join and Survivor would be $425.

My DW is 54 and I am 53, emotionally retired, but still w*rking.

Can you share any advice and personal experience with a decision like this?


“The problem with the world is that the intelligent people are full of doubt, while the stupid people are full of confidence.”

(—Charles Bukowski)
wanaberetiree is offline   Reply With Quote
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 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!

Old 04-28-2013, 10:39 AM   #2
braumeister's Avatar
Join Date: Feb 2010
Location: Flyover country
Posts: 14,583
One quick way to get a feel for this is to use
to plug in your lump sum or desired payment and see if you might do better one way or the other.
Since these are dependent on your age, gender, and state, it's hard to give you a blanket answer.

braumeister is offline   Reply With Quote
Old 04-28-2013, 10:45 AM   #3
Thinks s/he gets paid by the post
heeyy_joe's Avatar
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
I would wait if you can. If you retire early, the pension income will be a part of gross income when determining ObamaCare subsidies.
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote
Old 04-28-2013, 11:00 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 25,181
The IRR implicit in 54k growing to 83k over 10 years is only 3.47%. Not bad, but I think you could do better rolling over the $59k to an IRA, putting it in Wellesley and waiting 10 years.
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 65/35/0 AA TBD
pb4uski is online now   Reply With Quote
Old 04-28-2013, 12:59 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
Join Date: Jan 2008
Location: NC
Posts: 15,074
Along with the replies you've gotten above, annuities are historically expensive (for the monthly income they provide) now due to low interest rates. However, low interest rates are going to be with us for a while, it not a long better deals on annuities may be a long way off.
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 40% equity funds / 35% bond funds / 25% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 04-28-2013, 09:14 PM   #6
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 4,083
With no COLA and growth that kinda just matches average inflation, delaying sounds bad. DW has a similar situation and we'll take it as soon as possible.

While the annuity may be bad due to interest rates, the lump sum may be worse if they assume a fantasy interest rate when calculating it. Shop around and see if the lump sum would buy something better, or break out the calculator and and see if you might do better by investing it yourself in your normal AA or something conservative.
Animorph is offline   Reply With Quote
Old 04-28-2013, 09:56 PM   #7
Thinks s/he gets paid by the post
timo2's Avatar
Join Date: Jul 2011
Location: Bernalillo, NM
Posts: 2,200
Will the sponsoring organization still be providing the pension in 10 years, or do you need to get what you can now?. there have been a lot of shenanigans with pensions by companies and governments in the past. Just something to ponder. If the odds are it will be there, I would wait to collect it until I quit working, whatever years that is.

"We live the lives we lead because of the thoughts we think" ...Michael O’Neill
"We can cannot compel others to do our will" ....Norman Goldman
"There never is shortage of the gullible to accept the illogical"...Anonymous
timo2 is offline   Reply With Quote
Old 04-29-2013, 07:30 PM   #8
Recycles dryer sheets
Join Date: Dec 2011
Posts: 388
Originally Posted by Animorph View Post
With no COLA and growth that kinda just matches average inflation, delaying sounds bad.
Not correct at all. The latest 12 month CPI-U rate of inflation from the BLS was 1.5% on 4/16/2013. So, the rate of return calculated above is double that of inflation that we are currently experiencing.
Khufu is offline   Reply With Quote
Old 04-29-2013, 07:53 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2013
Posts: 6,755
We took our pensions as annuities to have a unique income source in semi-retirement and later. We ran the numbers at and the lump sums offered were never that impressive, especially for my pension which has a COLA. And the COLA only kicks in once I start the payments.

I can take the payments at 55 and get COLA increase to age 65, but if I start the payments at 65 the payments are not increased by any COLA in the preceding years. So it seemed better to start early. And the lump sum offered was less than the lump sump required at for the same monthly benefits without any COLA increases.

We have several pensions between us and I figure the odds of the different pension funds as well as the PBGC completely going bust (and not getting bailed out) are relatively slim.

On the other side of the coin, because of historically low interest rates, the lump sum offers will probably go down in future years. So if you think you want the lump sum for your pension it might be good to take it sooner rather than later when interest rate are likely to go up.

daylatedollarshort is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

» Quick Links

All times are GMT -6. The time now is 07:10 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.