The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: hunt2eat on January 07, 2017, 02:00:26 PM
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I have a small pension that is valued @ $4k. The monthly payout is $15-20 month. The interest rate is 4%. I'm wondering if I should roll it over to an my IRA or if I should just let it grow and keep the guaranteed 4%? The monthly payout doesn't do much for me right now.
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I also have a small pension valued @ $7K . My initial thought was to roll it over but want to do some more research before pulling the trigger. Curious what other opinions are also.
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4% with or without an inflation adjustment?
In your shoes I'd probably roll it over just because it'd be one less piece of financial info to track from now all the way to full retirement age.
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4% is the interest on the cash value of it.
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I have a cash balance pension worth around 12k from a former employer that I will never return to. It's guaranteed a return of 5% or the 30-year treasury rate, whatever is greater. As such, I consider it part of my bond allocation and just leave it be.
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Well 4% is better than you'd get buying treasury bonds (~3% for a 30 year treasury right now). But if you'd invest the money you rolled over into your IRA in the stock market, you might expect to earn 9% before inflation (6.8% after). So it depends on what you'd do with the money if your rolled it over to an IRA. If you'd buy bonds, I'd say keep the money in your pension plan. If you'd buy stocks, I think it makes sense to roll it over.
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I'd be nervous about the company going under or otherwise changing their pension payouts over the next however many years. Money in hand (well in Vanguard) is always worth more to me.
Pensions also restrict your tax flexibility once payments start as well.
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