Author Topic: Pension to 401k lump sum  (Read 561 times)


  • Pencil Stache
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  • Age: 52
  • Location: SE Tenn
Pension to 401k lump sum
« on: August 21, 2018, 11:29:19 AM »
So, my megacorp has implemented several changes to our defined benefit plan over the past few years, including no longer funding the accounts of those in my cohort and diverting our pension contribution to our 401ks instead (which I prefer).

Now they are offering us our pension as a lump sum rollover to our 401k as a "one and done" single opportunity offering.

So, my choices are 75k rollover now or about $500/month for life starting in 2022. (when I'll RE at 55.)

For me, I have asked myself whether or not I would buy a $500 annuity in 4 years for $98k (75k compounded at 7%/yr).  The answer to that is NO for me so I'm planning to take the lump sum now and invest it. 

Also, we have fidelity brokerage link in our 401k plan so I can invest it however I want to (not stuck with crappy funds like a lot of folks are.) I also have several houses/apartments which constitute a non-stock market income stream of about net 2k/month.

So, what would you do?  Anything else I should consider?



  • Pencil Stache
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  • Age: 42
  • Location: Maryland
Re: Pension to 401k lump sum
« Reply #1 on: August 21, 2018, 12:04:06 PM »
I'm with you. Take the rollover.

The other downside of the pension, is what happens to it if you die young? You can pass the 401k on to family.


  • Walrus Stache
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Re: Pension to 401k lump sum
« Reply #2 on: August 21, 2018, 09:03:50 PM »
Much depends on what you get for "i" and "L" in the table below.
Three ways to evaluate "pension now"  vs. "pension later"
Compare pension payment promised at the later time to either
  - the "Interest generated by Future Value (FV) of the lump sum" (FV principal is not touched), or
  - the "Constant withdrawal of FV over time L" (principal goes to zero), or
  - "Trinity-style withdrawal of FV over time L" (annually inflated spending; principal -> zero)
Lump sum nowPV$75000
Payment starting nowPmt_now0$/payment
Interest ratei7.0%/yr
number of years until annuity beginsn4yr
number of payments/yearfreq12/yr
When payments are made for each ntype00 = at end, 1 = at start
Future ValueFV$99154
Interest generated by Future ValueFV(i,n,P) * i578$/payment
Longevity of future annuityL40yr
Constant withdrawal of FV over time LPmt_future616$/payment
Spending growth rate (e.g., CPI)g2.0%/yr
First year (of 40) Trinity-style withdrawalW(FV,L,i,g)5740$/yr
See rows 73-94 of the 'Misc. calcs' tab in the case study spreadsheet to enter your numbers.