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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: growingstaches on February 02, 2014, 03:44:37 PM

Title: What to do with a small cash balance pension
Post by: growingstaches on February 02, 2014, 03:44:37 PM
I'm 35.  My wife is 34.  She has a cash balance pension account from an old employer.  The current value is $3067.   She is fully vested, and can begin taking distributions now.  Based on reading all options here is what I see available to us.


Option 1

- Lump sum distribution and roll into a rollover IRA.  ( We would add it to her already existing Vanguard rollover and invest in VTSAX )

Option 2

- Begin taking distributions of $12 / month now for the rest of her life.   Upon her death I would continue to receive $12 / month for the rest of my life.

Option 3

- Continue doing nothing and check this balance yearly, scratch our heads and say - "What the F should we do with this?"

Title: Re: What to do with a small cash balance pension
Post by: wtjbatman on February 02, 2014, 07:55:35 PM
So no adjustment for inflation, right? Just $12 a month? Well if she lives to 85 (and you pass away the same time or earlier), she will collect $7344 total. Even if one of you lives to 95, it will still only be $8784.

If you invest the $3067 now, and assuming that you don't touch it until she is 60, and the return is 8% a year after inflation (shouldn't have a problem meeting that kind of return with that long of a time frame in the market), it will be worth $22,685.

I know what I would do.
Title: Re: What to do with a small cash balance pension
Post by: aj_yooper on February 02, 2014, 08:10:52 PM
Have Vanguard set up the transfer to your IRA and blend it into your asset allocation plan.