I retired from MegaCorp three years ago at age 54. I have a small pension I had accumulated until the plan was frozen years ago when it was replaced purely with 401K and matching. I started drawing my pension last year at age 56. I have now been offered a buyout that I am considering.
I've run the numbers and I think I understand my ROR if I leave it in place versus taking lump sum, but I'd like a math check and any other advice on this buyout option. I've normalized the buyout and monthly amounts to make math easier.
Assumptions & facts:
Age at buyout (wife same age): 58
Life expectancy for calcs: 85
Buyout amount: $100k
Current monthly gross income (100% spouse survival): $485
If we take the buyout, we would roll the lump sum into an IRA. We'd obviously have no pension payment going forward, and not begin any IRA withdrawals until at least 59-1/2. As I understand, the IRS would want the 10% early penalty recapture on the year and a half of pension payments we took up to the time of buyout. This is less that 1% of the buyout amount.
If my calcs are right, it looks like the ROR for this lump sum over 27 years (58 to 85) would be about 3.6%.....so if I can do better than 3.6% with my lump sum I would be better off.
Anything I'm missing here?
Appreciate any comments....thanks!
I've run the numbers and I think I understand my ROR if I leave it in place versus taking lump sum, but I'd like a math check and any other advice on this buyout option. I've normalized the buyout and monthly amounts to make math easier.
Assumptions & facts:
Age at buyout (wife same age): 58
Life expectancy for calcs: 85
Buyout amount: $100k
Current monthly gross income (100% spouse survival): $485
If we take the buyout, we would roll the lump sum into an IRA. We'd obviously have no pension payment going forward, and not begin any IRA withdrawals until at least 59-1/2. As I understand, the IRS would want the 10% early penalty recapture on the year and a half of pension payments we took up to the time of buyout. This is less that 1% of the buyout amount.
If my calcs are right, it looks like the ROR for this lump sum over 27 years (58 to 85) would be about 3.6%.....so if I can do better than 3.6% with my lump sum I would be better off.
Anything I'm missing here?
Appreciate any comments....thanks!