Author Topic: Roll Pension Lump Into 401k, Or Leave In Plan  (Read 1099 times)

stashing_it

  • Stubble
  • **
  • Posts: 141
Roll Pension Lump Into 401k, Or Leave In Plan
« on: November 21, 2017, 06:27:15 PM »
I am 33, and after 12 years at a large manufacturer, I am leaving to go work in software.   My current employer has a pension plan, which can be taken as a lump sum.

If I were to cash it out the day I leave in January, the pension estimator puts it at around $44,000.    I believe I can roll it into a 401k without tax implications.   I could also do a traditional IRA (I think) but that interferes with the backdoor Roth.

If I leave the pension at the company, I can also estimate its value in the future as a lump sum (or annuity).   It appears to grow between a 3-5% annualized rate depending on number of years.  (~3% growth in 1 year,  ~5 annualized growth in 32 years)

Is there any reason I'm missing that this isn't an easy choice to take the immediate lump sum, roll it into my 401k, and plan for 7-9% growth in the S&P fund that I'm invested in?

MDM

  • Walrus Stache
  • *******
  • Posts: 9685
Re: Roll Pension Lump Into 401k, Or Leave In Plan
« Reply #1 on: November 21, 2017, 08:20:07 PM »
Is there any reason I'm missing that this isn't an easy choice to take the immediate lump sum, roll it into my 401k, and plan for 7-9% growth in the S&P fund that I'm invested in?
If you take 7-9% growth as a given, then it is an easy choice.

If you assume the 5% is guaranteed (and that may or may not be true) but the S&P growth is not, it's a little tougher.

If history is a guide to the future, the S&P growth will win - but that's not guaranteed.

NoStacheOhio

  • Handlebar Stache
  • *****
  • Posts: 2143
  • Location: Cleveland
Re: Roll Pension Lump Into 401k, Or Leave In Plan
« Reply #2 on: November 22, 2017, 07:23:03 AM »
There's also an element of risk with regard to the stability of the company/pension. For myself, I would much rather take the lump sum and manage it in my own personal account, with very few exceptions.

Cromacster

  • Handlebar Stache
  • *****
  • Posts: 1696
  • Location: Minnesnowta
Re: Roll Pension Lump Into 401k, Or Leave In Plan
« Reply #3 on: November 22, 2017, 07:37:45 AM »
I recently left a job that had a pension.  Company had a guaranteed 4.8% return or something thereabouts.  I decided to roll it into an IRA.  I don't plan on doing the backdoor Roth so this option worked for me.