Hi All,
I really enjoy reading these forums, there are so many helpful people here. Just wondering what you all think of this situation.
My wife is 43 and her previous employer has sent us an offer to buyout her pension. There are 3 options:
1. A lowered monthly payment, because she would be getting it early, of $178/mo starting now for life. I figured that to be $178 x 12 x 40 years = 85k. This would be taxed as regular income and would never change. After inflation that $178 is going to be nothing 20 or 30 years from now and it's not much now.
2. $30k lump sum which we would rollover to an IRA to avoid taxes. With 7% gains that could be $450K after 40 years. It's likely we would tap the earnings long before that, but even still, that's a boatload of money.
3. The last option was to do nothing and collect the pension when eligible. They did not say what the value would be but I think it starts at age 55. If use the 85k figure as the amount the company expects to pay out, I estimate the monthly payment to be $250 or so. Obviously, I need to get some more clarity around option 3. I'm guessing they did not provide a lot of detail because this is their least preferred option.
To me, it seems like a no brainer to take the 30K lump sum. Am I missing anything?