How do I handle a small pension?

[STEMorbust]

Hi there, I have the below options for receiving a $15k pension. I'm 30yo and no longer work for the employer.

1. Lump-sum payment -- would be docked min 30% in taxes.
2. Lump-sum rollover
3. Immediate monthly benefit of $50 for life
4. Deferred monthly, $330 beginning at age 65

I'm maxing 401k currently FWIW. Which option is my best course of action? Wouldn't mind putting $10k into our house but I want to make the most mustachian decision.

[Sibley]

2 or 4.

I rolled over mine into an appropriate IRA account. I didn't want to have to worry about the hassle of keeping track of a small amount for so long.

[STEMorbust]

2 or 4.

I rolled over mine into an appropriate IRA account. I didn't want to have to worry about the hassle of keeping track of a small amount for so long.

Makes sense! I'm leaning toward the rollover. Thanks for the input.

[Laura33]

Rollover.  Don't use retirement savings for current lifestyle wants. 

If the $330 is inflation-adjusted, I may be persuaded in that direction.  But the rollover is just simpler.

[JSMustachian]

I would do the rollover into an IRA. The pension amounts are prob not inflation adjusted so the buying power will be much less down the road. That $15,000 if compounded at 7% per year would be worth $172,000 at 65.

[ericrugiero]

I would do the rollover into an IRA. The pension amounts are prob not inflation adjusted so the buying power will be much less down the road. That $15,000 if compounded at 7% per year would be worth $172,000 at 65.

And per the 4% rule you could take $573/month from that. 

I would take option 2.  It's probably mathematically superior (depending on returns), you can will it to your heirs and it's definitely simpler. 

[amberfocus]

Another vote for Rollover IRA. You get the money now, rather than leave it in the hands of an employer who may or may not still be in business in a few decades. Also, if you're planning to retire early, it's better to manage your own accounts so that you can handle withdrawals on your own timeline.

[Catbert]

2 or 4.

I rolled over mine into an appropriate IRA account. I didn't want to have to worry about the hassle of keeping track of a small amount for so long.

Yep, the hassle of tracking this for 35 years isn't worth it.  If you were 60 instead of 30 option 4 would be worth considering just based on wanting diversity of income.

[bbqbonelesswing]

Do you need the money now? If not, then roll it over (option 2).

[STEMorbust]

Consider it rolled!

[rmorris50]

This is small enough and you’re young enough that I’d roll to an IRA and then look to do a conversion to a Roth and then just let it sit and grow!


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