Should I take this Lump Sum?

[48Fire]

Not a large amount, but as part of my pension, I can give up $1,239.60 per year for a lump sum of $25,458. I am 52, so a couple questions:

1. Will I need to roll this into an IRA?
2. Is it still worth the penalty if I tap it early?

I think it still may be worth the penalty, and will keep a small amount available for an emergency fund.

Thanks for your comments!

 

[gauss]

Is it a fixed (ie non-COLA)?
At what age does the $1,239.60 begin?

You don't have to roll it into and IRA, but you will then pay immediate tax on it.

You should especially consider rolling to an IRA if the additional $25,458 in income would push you into a higher tax bracket.

You can roll it into an IRA and still have some provisions to get access to it early without 10% penalty if you set up a 72(t) series of withdrawals.

-gauss

 

[48Fire]

It is a fixed (ie non-COLA)
The $1,239.60 starts at age 52, possibly in July if I pull the trigger.

 

[heeyy_joe]

What are you going to do with $100 a month for the rest of your life?

 

[48Fire]

It would be a nice golfing budget

 

[heeyy_joe]

It would be a nice golfing budget

You have your answer. You're welcome.

 

[Bestwifeever]

Not a large amount, but as part of my pension, I can give up $1,239.60 per year for a lump sum of $25,458....

What percentage of your pension is this? Small?

I usually vote against the lump sum but in this case I think I'd take it since it's 20 years of payments. You could probably grow it within your IRA to a nice little amount.

 

[martyb]

It would be a nice golfing budget

I'm thinking more like a fishing budget! When I'm too old to fish, maybe I'll try golf...

 

[48Fire]

What percentage of your pension is this? Small?

I usually vote against the lump sum but in this case I think I'd take it since it's 20 years of payments. You could probably grow it within your IRA to a nice little amount.

Yes, very small, 2.8%. I agree with you on lump sum, but this caught my attention.

 

[48Fire]

You have your answer. You're welcome.

Thanks

 

[LoneAspen]

I know for myself, I'd get a lot more out of a $25k lump sum today, than I would $100 a month the rest of my life.

With $25k, I could set up an emergency fund, invest it, pay off a loan or debt, make a nice donation to charity, or if the money wasn't needed elsewhere treat it as "mad money" and buy something fun with it (not the best use of it, but still a use).

With $100 a month...I doubt I'd even notice it or could budget for it. It would be like it's not even there.

 

[48Fire]

I know for myself, I'd get a lot more out of a $25k lump sum today, than I would $100 a month the rest of my life.

With $25k, I could set up an emergency fund, invest it, pay off a loan or debt, make a nice donation to charity, or if the money wasn't needed elsewhere treat it as "mad money" and buy something fun with it (not the best use of it, but still a use).

With $100 a month...I doubt I'd even notice it or could budget for it. It would be like it's not even there.

I like that rationale a lot!! I was thinking similar thoughts, but it seemed a little wrong. I am leaning towards life is too short, and very uncertain. Thanks!