Author Topic: Cashing out Pension to Pay-off debt  (Read 4505 times)

AntonioINMD

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Cashing out Pension to Pay-off debt
« on: September 11, 2013, 01:37:38 PM »
Hi, I am new to the forums but have been reading for a while.  I have a question for the community regarding paying off student loan debt with a company sponsored pension pay-out. 

My employer provides employees with a company sponsored/funded pension in addition to a 401(K).  If I leave my company I have the option to roll my pension into my 401(K) or take a cash payout.  I could use that payout to pay off all my outstanding student loans with one single payment and still have money leftover.  Or roll that pension into my 401(K) and slowly make payments on the student loans which would result in more money wasted on interest.  Thoughts?

I am looking to relocate my family to a lower cost of living state and if that happens I have to decide what to do with my pension.

Thanks in advance for your help!

Antonio

Cromacster

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Re: Cashing out Pension to Pay-off debt
« Reply #1 on: September 11, 2013, 02:15:26 PM »
My first instinct is to say: Roll over to 401(k) or to an IRA.

But I'll ask, what is the interest rate you are paying on your student loan, what are the monthly payments, what does the rest of your budget look like?  If you provide a whole picture of your situation the people on this board will be able to better answer your question.

Kira

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Re: Cashing out Pension to Pay-off debt
« Reply #2 on: September 13, 2013, 09:11:17 PM »
Depends what you'd get out of the pension and how much you're paying in student loans.

And whether you think this pension is going to be around when you hit 65.

If the student loan debt isn't crushing, I might be inclined to just keep the pension or put it in the 401k. If you use the money to pay off debt, you will not be losing money on interest, but you will on the flip side be losing money on not having that money invested (to say nothing of the taxes which are likely to be horrendous.) The potential growth of that money over the years is nothing to sneeze at.