Author Topic: Pension decision  (Read 971 times)

FrugalFisherman10

  • Bristles
  • ***
  • Posts: 318
    • Fly Fishing Photo Project
Pension decision
« on: April 24, 2017, 12:19:11 PM »
After leaving my old employer, I have a pension benefit projected to be about $700 per month under the Single Life Annuity form of payment, if I start receiving benefits on my 65th birthday. I'm currently 26 years old, and have no idea what to do with this, so I figured I'd ask.
I can also:
- take a lump sum payment now (probably subject to taxation), then invest it myself
- start receiving benefits immediately (obviously won't do this, as I have no need for this money now or for the next say, 40 years (assuming normal working career), 15 years (assuming ER))
- start receiving benefits at some point in the future, like when I retire. This is what I'm leaning towards for some reason. (if before age 65, I'm not sure how taxes would work)

To consider a somewhat similar scenario, if I were to 'win a small lottery' today, I would take the lump sum and invest it. Why should I do anything different with this amount?

But I also like the idea of 'source diversification', in that by "keeping this money' with the benefit administrator/employer, I hedge myself a little against my own errors, or a crash of other investments or things I encounter over the next 40 years before I need this money. That may just be made up/unfounded worries, since they probably have it invested in a similar manner to what I would, and an economic downturn would affect this 'projection' for me either way. It is just a 'projection' after all, not an obligation on their part.

I'm saying I like the idea of this money being completely 'safe' and separate from all the money i save and invest on my own, however, I don't know if this is any more safe than just investing it myself.

If my prior employer isn't around one day, then is my pension money gone forever? ...Unlikely this would occur, as the pension is with a Big 4 accounting firm, but not impossible (see: Arthur Andersen). 

Given my  experience with the current landscape of public accounting firms and their willingness to stretch the limits on 'independence', it's not unrealistic that another of these firms will collapse/disband at some point.

What if the plan/benefits administrator isn't around one day (Benefits Express/Hewitt), then is my pension money gone forever?

So in summary - I'd like some feedback on:
What should I do with my pension benefits from my old employer? And how should I go about deciding/what should I think about?

By the River

  • Stubble
  • **
  • Posts: 202
Re: Pension decision
« Reply #1 on: April 24, 2017, 12:27:06 PM »
I had a pension buyout decision a few years back.  I was able to roll it into an IRA without a tax impact (taxes deferred until I use it).   I think most people would say to do the calculation of returns and determine which is better financially.  I switched primarily for diversification as my wife is still employed with the same company that I had worked for.