WWYD? Receive pension payments at 65 or take the lump sum now?

[jerseygirl07067]

DH used to work for a large corporation that offers a pension. He was there for 15 years and is eligible to collect the pension when he turns 65. He can start collecting earlier but would get a reduced amount.

So here are the numbers, what would you do? DH is 48 years old.

Lump sum payout now of $72,000 vs monthly pension of $1392 starting at age 65.

If we take the lump sum, and roll it over into an IRA there are no current tax implications, but would have to pay tax on it when we withdraw. If we take the lump sum and don't roll it over, there is 20% tax + 10% penalty---we are not going to do this, I don't think that would be sensible at all.


So we're trying to decide if we should take the lump sum, roll it over and invest it, or just get the monthly pension payout at age 65. The benefit of the monthly pension is that it is a fixed amount regardless of what the market does. We already have a good amount invested already, so it would be nice to have that fixed amount. On the other hand, if we invest it and get a 6% rate of return over time, we'd come out far ahead, especially the longer DH lives. But you can never predict the market.

I would love to hear opinions on this, and from those who have BTDT too.

[magnoliaparadise]

I have no advice for you, but will be watching this thread. I am in the exact same position.
The one thing that I assume you took into consideration is ... if the monthly pension payout starts at 65, it might be very lucrative for you guys assuming that DH lives a long time! So although the 6% rate of return is good and increases the longer DH lives, so does the monthly pension payout if you know what I mean.

I do think, though, that these type of pensions (good ones, fixed) are unusual - I don't know how many people here have BTDT - I know few people who have the kind of pension I have.

[KrisM]

I'd take the lump sum. What if DH die before 65? Would you get any pension? You'd still have whatever the lump has grown to. What if the company goes bankrupt? Would the pension go away? I'd rather be in control of the money and have it absolutely be mine forever, rather than hope it works out.

[JBaxter]

DH says take the lump some now. No guarantee you will live to 65 and the funds are under your control. Talk to your accountant or financial adviser and invest it.

[hillview]

DH says take the lump some now. No guarantee you will live to 65 and the funds are under your control. Talk to your accountant or financial adviser and invest it.

agree with this also feel like corps have been changing pension payouts as they run out of money

[hellokitty]

Lump sum now. You don't know what will happen in the future. This gives you guys more control over what you can do with the pension $ with your own investments.

[BananaMama]

Lump sum

[klwa]

I have a similar pension to what your DH has. If I were you, I'd look into what happens if your DH dies prior to claiming the pension or soon after. If the surviving spouse can still get the pension, I'd say keep it in. If you can't, I'd roll it over.

[♥ms.pacman♥]

I would totally take the lump sum now and invest it. I wish we had this option for DH's pension (from his former employer). He will be getting a pension of ~$3k per month starting at age 65. Since he was there for over 10 years he does not have the option of getting a lump sum (that is only for those who were there for shorter times and thus have smaller pensions). DH keeps commenting that while it sounds like a lot now, a few grand a month will be chump change by then (he is only 36, so it will be 30+ years from now), so he just thinks of it as bonus money rather than anything substantial. We would do lump sum now if it were an option.

[DualvansMommy]

I had the same setup when I left my employer of 11 years three years ago. I was offered to take the lump sum or wait till I was 65 to start withdrawing it. I chose taking the lump sum and invested it in a newly opened rollover IRA account.

17 years is a long time for that significant amount of money to be under control by somebody else. You just don't know how that company will fare or whether your DH will face new revised pension policies. That always happens first thing when they start have money problems.