What would you do with a $19k pension?

[Carpediem]

I'm in the early stages of prepping for Freedom Day. Mega froze the pension plan several years ago so I only have around $19,000 in a 'cash balance plan'. Taken as a joint and survivor payment option, the monthly payment would be around $90-95. (No COLA)

What is the best thing to do with a small pension such as this? Annuity or lump sum? I'm leaning toward rolling it into my VG tIRA but not sure how to properly evaluate the best option. Are there other better options?

Btw, I'm 60 and DW is 59 if it matters.

[pb4uski]

I'd roll it into my Vanguard tIRA.

[flintnational]

The annuity at $90 per month ($980 per year) is 5.6% of the lump sum. As a rough rule of thumb, below 6% take the lump sum. But, there are lots of other considerations. This just gives you a relative value of each choice. Here is a link to an article in the Atlanta paper by a fee only adviser, Wes Moss, explaining the 6% and the other issues to consider. Out of simplicity, I might just take the cash.

[gwraigty]

The lump sum is about 17 years of $90 payments. If your wife survives you, she has to jump through some hoops to keep collecting that $90 per month. I'd take the lump sum.

[Carpediem]

Quote:

Originally Posted by flintnational This just gives you a relative value of each choice. Here is a link to an article in the Atlanta paper by a fee only adviser, Wes Moss, explaining the 6% and the other issues to consider. Out of simplicity, I might just take the cash.

Good information in that article. Thank you for posting it.

[CardsFan]

I would roll it to an IRA. IMHO it is not worth the hassle.

FWIW, I have a $100/month pension that will start at 65. I would take the cash value in a heartbeat, but that is not an option (old pension from a job I left 40 years ago)

[Rickt]

Quote:

Originally Posted by CardsFan I would roll it to an IRA. IMHO it is not worth the hassle. FWIW, I have a $100/month pension that will start at 65. I would take the cash value in a heartbeat, but that is not an option (old pension from a job I left 40 years ago)

My wife worked for a mega corp in New Jersey 1986-1994 and had a similar pension $21,100 or $113 per month. We took the lumpsum in January 2019 and rolled it into her tIRA at vanguard.

Very happy about the decision....simplifies the finances.

Cheers,
Rick

[NW-Bound]

What would one do with a $19K lump sum?

Have you seen the "blow dough" thread? Lots of ideas there.

Oh, be sure to allow for taxes, as you will not have all of that $19K to spend.

[CRLLS]

I just read the report. Missing, as one of the considerations is estate plans. Except with spousal benefits (if chosen) or a period certain option, a pension ends and no further money is due when the pensioner passes. With a cash payout, any unspent money is part of the estate.

Frankly, I've done it both ways. I did a rollover on both a pension and 401K, I also took a small monthly benefit with 10yr period certain on an annuitized LI policy, essentially the same as a pension. I don't think there is a wrong plan, assuming you live an average life span.

[Stormy Kromer]

Funny you should ask. I had a pension from the Fire Dept. where I served worth---$19,000.


Just last week I set up a traditional IRA at Vanguard. They provided the paper that I sent to the pension custodian, instructing them exactly how the check should be made out. The check will be mailed to me, I send it to an address that Vanguard provided me. Once it arrives at Vanguard I can invest it however I like. I'm thinking either S&P 500 or Total Stock Index. I'm 53 and plan on holding it til at least 62 or likely RMD at 70.5 DW is the beneficiary with the 2 children as secondaries. Avoids probate.


So, that's what I would do with a $19,000 pension.

[Col. Klink]

Definitely the lump sum. Putting it in you tIRA is fine as well with the only caveat being that if you already have an amount in there high enough to make you consider taking money out at an age prior to 70 1/2 to avoid getting hit with a high RMD tax bill, then see the Blow the Dough thread.

[Carpediem]

Thank you for all the feedback. Very helpful and I appreciate it.

[kgtest]

Quote:

Originally Posted by pb4uski I'd roll it into my Vanguard tIRA.

+1, and might look into doing a roth conversion if my taxable income is low.

[Offgrid Organic Farmer]

Quote:

Originally Posted by Carpediem What would you do with a $19k pension?

I retired from the US Navy in 2001. I get a COLA increase to my pension each year. After 17 years of COLA increases to my pension, my pension has now increased up to about $19k/year.

What did I do with my pension?

We bought 150 acres of forest land, I built a large farmhouse, and I have re-invented myself as an off-grid organic farmer. [our farm has solar-power]

[Chuckanut]

I would roll it into the Vanguard IRA. With a bit of luck, it could turn into a COLA'd pension. Can you convert it over time to a Roth?

[Carpediem]

Quote:

Originally Posted by Chuckanut I would roll it into the Vanguard IRA. With a bit of luck, it could turn into a COLA'd pension. Can you convert it over time to a Roth?

I'm hoping so, especially since 90% of our savings is in VG tIRA.

[Texas Proud]

And I was thinking it was $19K per year!!!


For a cash balance I would roll it over without question.... I do not care what they pay monthly unless it was some ridiculous amount...

[Carpediem]

Quote:

Originally Posted by Texas Proud And I was thinking it was $19K per year!!!

I wish!