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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: KC Maybe on September 30, 2016, 11:07:32 AM

Title: Lump Sum Pension Offer
Post by: KC Maybe on September 30, 2016, 11:07:32 AM
Hello,

I have a vested retirement at a company I no longer work for. They are currently offering me a lump sump payout of $37,327.74 which I could roll over tax free into my current Vanguard IRA or I can wait another 24 years until age 65 and start collecting $885.81 per month.

I've been researching which is the better option. What would you do.

I no longer work outside the home and my husband will retire in five years.

Looking forward to your thoughts.

Thanks,
KC
Title: Re: Lump Sum Pension Offer
Post by: snuka on September 30, 2016, 12:39:11 PM
I recently posed the exact same question on this forum and the consensus was to take the buyout.  Even moreso if the future payout amount is not adjusted for inflation in years after the payments start.
Title: Re: Lump Sum Pension Offer
Post by: MDM on September 30, 2016, 06:01:07 PM
If you think inflation will be high, and/or you can get very good investment returns, take the lump sum.

If you think investment returns will be poor, and inflation low, take the monthly pension.

See http://forum.mrmoneymustache.com/ask-a-mustachian/my-past-employer-is-offering-me-a-lump-sum-pension-buyout-do-i-take-it/msg1237034/#msg1237034 as part of snuka's thread: your breakeven also is a little over 6%....
Title: Re: Lump Sum Pension Offer
Post by: Tjat on October 01, 2016, 10:29:14 AM
The company likely wants to remove debt obligations to (maybe to look more attractive for a buyout?). Try countering for a 50k payout and see what they say
Title: Re: Lump Sum Pension Offer
Post by: ender on October 01, 2016, 07:42:22 PM
The company likely wants to remove debt obligations to (maybe to look more attractive for a buyout?). Try countering for a 50k payout and see what they say

I never would have thought to counter on a pension buyout, is this actually a reasonable idea?

I have something like $25k worth of NPV in a previous employer pension, too, it'd be nice to get that cashed out and rolled into an IRA. But if I could ask for a bit more - bonus!?