### Author Topic: Should we take a lump sum?  (Read 2865 times)

#### oceanbreeze

• • Posts: 17
• Location: Massachusetts ##### Should we take a lump sum?
« on: February 12, 2015, 11:13:41 AM »
So we can take a lump sum in March as a small pension that my husband is entitled to. Or, we can wait and take the lump sum when we turns 65 in 3.5 years. Either way, we would roll it over into his 401K. I'm trying to figure out what to do but I'm no financial wizard-- My husband thinks we would be better to wait till he reaches 65. What should we do?
Here's the stats:
here are the numbers the way I see them
on 1/30/12 I have a screen shot that show that as of 8/1/18 my lump sump sum would be 44,027
on 1/29/15 (3 years) the lump sum as of 8/1/18 now shows as 46,661
according to the calculator I used that works out to a 2% annualized return for the 3 years.
Taking the 46,661 at a assumed 2% annual return from 2/1/15 to 8/1/18  (3.5 years) the lump sum would be 49,517
The offer from the company is get  the lump sum of 38,902 as of 5/1/15
Assuming we take the lump sum and roll it over in order for the 38,902 as of 5/1/15 to equal the 49,517 as of 8/1/18 we need to average an annualized return of 7.7% according o the calculator I used
Note the company says the 38,902 is an estimate as of 4/1/15 and the actual amounts may vary depending on the interest rate based in April but I cannot imagine the difference would be big.
Would our assumed calculations be correct and we should wait till he's 65?
Thanks so much for any help!

#### rpr

• Guest ##### Re: Should we take a lump sum?
« Reply #1 on: February 12, 2015, 11:28:50 AM »
So we can take a lump sum in March as a small pension that my husband is entitled to. Or, we can wait and take the lump sum when we turns 65 in 3.5 years. Either way, we would roll it over into his 401K. I'm trying to figure out what to do but I'm no financial wizard-- My husband thinks we would be better to wait till he reaches 65. What should we do?
Here's the stats:
here are the numbers the way I see them
on 1/30/12 I have a screen shot that show that as of 8/1/18 my lump sump sum would be 44,027
on 1/29/15 (3 years) the lump sum as of 8/1/18 now shows as 46,661
according to the calculator I used that works out to a 2% annualized return for the 3 years.
Taking the 46,661 at a assumed 2% annual return from 2/1/15 to 8/1/18  (3.5 years) the lump sum would be 49,517
The offer from the company is get  the lump sum of 38,902 as of 5/1/15
Assuming we take the lump sum and roll it over in order for the 38,902 as of 5/1/15 to equal the 49,517 as of 8/1/18 we need to average an annualized return of 7.7% according o the calculator I used
Note the company says the 38,902 is an estimate as of 4/1/15 and the actual amounts may vary depending on the interest rate based in April but I cannot imagine the difference would be big.
Would our assumed calculations be correct and we should wait till he's 65?
Thanks so much for any help!

I was a little confused by your post. So my answer below may be limited due to my understanding. Here is what I gather.

As of 1/29/15, on  8/1/18 the lump sum would be 49517.
On 5/1/15 the lump sum would be 38902.
You are correct that the annualized rate is 7.7% and that you should wait 65.

Is the 49517 amount guaranteed? Can it go lower?

#### oceanbreeze

• • Posts: 17
• Location: Massachusetts ##### Re: Should we take a lump sum?
« Reply #2 on: February 12, 2015, 11:32:26 AM »
Sorry--  8/1/18 the lump sum might  be 49517 if it shows the returns similar to the last 3 year. I'm assuming,  It could go lower. But, it could if we took it now, too.

#### MDM

• Senior Mustachian
•        • Posts: 11135 ##### Re: Should we take a lump sum?
« Reply #3 on: February 12, 2015, 11:41:18 AM »
So we can take a lump sum in March as a small pension that my husband is entitled to. Or, we can wait and take the lump sum when we turns 65 in 3.5 years. Either way, we would roll it over into his 401K. I'm trying to figure out what to do but I'm no financial wizard-- My husband thinks we would be better to wait till he reaches 65. What should we do?
Here's the stats:
here are the numbers the way I see them
on 1/30/12 I have a screen shot that show that as of 8/1/18 my lump sump sum would be 44,027
on 1/29/15 (3 years) the lump sum as of 8/1/18 now shows as 46,661
according to the calculator I used that works out to a 2% annualized return for the 3 years.
This is likely(?) due to the 3 extra years of work and the amount the company adds to the pension for those working years.  It's somewhat different from a return on investment.  Does it also assume he continues to work until 8/1/18 at a constant salary?

Quote
Taking the 46,661 at a assumed 2% annual return from 2/1/15 to 8/1/18  (3.5 years) the lump sum would be 49,517
\$46,661 * (1.02)^3.5 is \$50,010.  \$49,517 is after 3.0 years.

Quote
The offer from the company is get  the lump sum of 38,902 as of 5/1/15
Differs from above because it assumes he retires then instead of 8/1/18?

Quote
Assuming we take the lump sum and roll it over in order for the 38,902 as of 5/1/15 to equal the 49,517 as of 8/1/18 we need to average an annualized return of 7.7% according to the calculator I used
Yes.

Quote
Note the company says the 38,902 is an estimate as of 4/1/15 and the actual amounts may vary depending on the interest rate based in April but I cannot imagine the difference would be big.
Would our assumed calculations be correct and we should wait till he's 65?
Thanks so much for any help!
It depends on, among other things, whether he needs to keep working or if this lump sum will grow "on its own" while he is retired.  Could you clarify? 