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My wife recently changed jobs and has a cash balance pension plan with her former employer and I am trying to determine what to do with it.
I am 41, she is 40. In total, we have about 700k in retirement assets. I'm trying to maintain an 80/20 portfolio with intentions to move slowly towards 60/40 as we age over the next 15 years or so.
The employer calculator projects that her cash balance pension plan will be worth a lump sum of around 90k at age 53 and 52 (earliest commencement date according to the plan). It also projects annuity payments of around ~$450 per month at this time. If we wait until age 65, the lump sum grows to 141k. It projects annuity payments of around ~$950 at age 65.
I need to look at the assumptions in the plan more to understand them, but I believe they are using a benchmark interest rate +1-2% to apply interest each year. I assume, however, whatever assumptions used by the plan, are overly optimistic. I also assume that there is a real possibility that at some point the plan could have interest rates reduced or frozen altogether.
We are trying to figure out what to do with this plan. Based on the risks of changes at the employer and overly optimistic assumptions I am not sure leaving it there is the best option. Since it has served as a "bond" in our portfolio allocation, I am inclined to roll it into an IRA and treat it as fixed income and purchase BND or VBTLX and be done with it.
Has anyone experienced anything similar and what are some considerations that I should be making here when assessing what to do with the cash balance pension?
I am 41, she is 40. In total, we have about 700k in retirement assets. I'm trying to maintain an 80/20 portfolio with intentions to move slowly towards 60/40 as we age over the next 15 years or so.
The employer calculator projects that her cash balance pension plan will be worth a lump sum of around 90k at age 53 and 52 (earliest commencement date according to the plan). It also projects annuity payments of around ~$450 per month at this time. If we wait until age 65, the lump sum grows to 141k. It projects annuity payments of around ~$950 at age 65.
I need to look at the assumptions in the plan more to understand them, but I believe they are using a benchmark interest rate +1-2% to apply interest each year. I assume, however, whatever assumptions used by the plan, are overly optimistic. I also assume that there is a real possibility that at some point the plan could have interest rates reduced or frozen altogether.
We are trying to figure out what to do with this plan. Based on the risks of changes at the employer and overly optimistic assumptions I am not sure leaving it there is the best option. Since it has served as a "bond" in our portfolio allocation, I am inclined to roll it into an IRA and treat it as fixed income and purchase BND or VBTLX and be done with it.
Has anyone experienced anything similar and what are some considerations that I should be making here when assessing what to do with the cash balance pension?
