Retired June 2015 @ age 53 (will be 58 in January) ‘Single’
Have been living comfortably with my private sector pension & investment income.
We had a different pension for a short period early in my career at the company.
Because I didn’t have a full 30 calendar years in when I retired, I will only become eligible to draw from ‘that’ pension when I turn 62 in 2024.
At that time, it would be $283.00 per month.
Now I've been offered a lump sum payment. According to the company, this will only be offered once, & if I choose either option 1 or 2, I have to have the paperwork postmarked by October 31, 2019
A one time lump sum payment of $35k
Begin receiving a ‘single life annuity’. Not sure if I could begin drawing that now, or have to wait until I'm 59 1/2 ?
Talked to a woman at the company today but forgot to ask her this. I'm pretty sure I could begin it now, but because I'd be starting it much earlier than age 62, the amount would only be $191.92 per month.
*This pension has no guaranteed payments, regardless of when I chose to start it. If I pass away before I start it, it's gone. If I pass away after being on it for 2 months, it's gone*
Do nothing. Wait until I'm 62 years old in 2024 & start collecting the $283.00 per month at that time.
My plan would be to take the lump sum & roll it all into an existing IRA
The lump sum payment ‘seems’ like a slam dunk to me for several reasons.
1: I don't need the income now.
2: If I take the $35,124.97 & divide it by $191.92, (the single life annuity) I come up with 183 months. Divide that by 12 & you have 15.25.
If my math is right, this means that by taking the lump sum, they’re pre-paying me 15.25 years of monthly payments
3: If I waited until the year 2024, when I'd be 62, I'd have to collect the $283.00 per month for 10.33 years just to equal the amount they're willing to pay me today. Although we're both doing fine now, there's no ‘guarantee’ that the company, or myself will be around in 2024.
4: Once it's rolled into my IRA, there's a beneficiary in case something happens to me. This is the most important one to me. As mentioned above, if I died before that age, or died one year after starting the pension at age 62, that would be it. No further payments made to anyone.
The money would also have a chance to grow.
Summary: I can't think of a single reason not to take the lump sum payment, & that makes it seem too obvious, like I'm missing something ?
One more thing. The rollover scares me a little bit. Last year I went over the income cliff related to healthcare by $305.00
While I was able to pay the big penalty, I definitely don't want to do that again.
I want to be sure that the entire amount is eligible for rollover.
When I mentioned this to the company associate, she really couldn't make any guarantees. She told me to consult a tax professional.
I talked to 2 people, one is an accountant, & the other, a financial advisor.
They both told me that I have nothing to worry about, the company wouldn't offer me a lump sum like this, if the entire amount wasn't eligible for a rollover. When I said I'd like peace of mind, the accountant basically said “I’m just trying to save you some money”
Translation: Hiring him just to look over these papers would be a waste of my money.
If I decide to have him look it over anyway, he won't be able to get to it until the 15th.
So just for my own curiosity, I’m going to scan & upload the 3 pages regarding the tax implications of plan payments (rollovers)
Appreciate any input.