Reader Case Study: pension question for mid-career IT professional ready to RE

[mitzi6]

I am one of those lucky folks who works for a company which still provides a pension benefit to employees hired before 2010.  I’ve been there for 18 years and don’t plan to work another 12 to reach the “cliff” at age 55 now that the plan offers a lump-sum distribution to all eligible participants.  I’m contemplating early retirement within the next year and am seeking advice on how to take my pension benefit:

•   Lump sum distribution now = $76,625
•   Lump sum distribution in 12 years at age 55 = $137,519

My math shows that delaying the lump sum distribution assumes a 5% return on the amount I could take now.  Anyone disagree with my strategy to take it now and roll it directly into an IRA invested in VASGX?

[MDM]

If you are reasonably sure the company will still be around in 12 years, a guaranteed 5% return isn't bad for the bond portion of your asset allocation. 

Either taking or deferring the lump sum is a defensible decision, depending on what one assumes about the market over the next 12 years.

[KungfuRabbit]

Can't really say that without knowing the rest of your portfolio.

If you rent a house, don't own anything of value, and have 100% of your money in stocks....you should probably take the guaranteed 5%.

If you own a house free and clear and have $100,000 in your checking account, you should cash out and invest.

Honestly though I'm on the safer side generally.  A 5% guaranteed return is pretty damn good.  And with the "Trump factor" there is NO telling what the stock market will do (I can't promise up or down, but I'd bet its a wild ride over the next 4 years...). 

[Babybalrog]

If you rent a house, don't own anything of value, and have 100% of your money in stocks....you should probably take the guaranteed 5%.

If you own a house free and clear and have $100,000 in your checking account, you should cash out and invest.

Same advice.

If you NEED the money, keep it in protected. 5% return is good. We're assuming at this point you've decided to take lump sum over pension anyways.

If this is gravy money, take it out, invest, and leave it to your kids or favorite charity.

[I am accepting endowed scholarships/professorships in my name if you are lacking ideas]