Lump sum payout of a pension?

[mushmouse]

Hello!  Just looking for some advice on this.  I'm vested in a small pension at my previous employer and received a letter saying they are offering a lump sum payout instead of collecting monthly payments in the future.  What would you do in this situation, or what particular things would you look at in order to make the decision.  I would definitely be rolling the money into a retirement account if I take a payout.  Thanks for any help or opinions.

[mainelyfoolish]

I had this situation with a prior job and the lump sum was a relatively small amount. I took the money and rolled it into an IRA because it I figured it would be easier to keep track of that way.

[megstoo]

I was vested from a previous employer and I didn't know about it just recently when I received a letter in the mail. My options were to either withdraw the small amount in cash (and have them withhold the fed taxes) or roll it over to something else. I ended up withdrawing it and using that money to pay off a cc. Granted it was a small amount (under 2k). If I would have rolled over to my 401k I would have had to pay a transfer fee and then a seperate monthly fee so for me it was better it take the cash for debt.

[littlemisssunshine]

Sept 22, 2014 11:40:07 GMT -5 mushmouse said:

Hello!  Just looking for some advice on this.  I'm vested in a small pension at my previous employer and received a letter saying they are offering a lump sum payout instead of collecting monthly payments in the future.  What would you do in this situation, or what particular things would you look at in order to make the decision.  I would definitely be rolling the money into a retirement account if I take a payout.  Thanks for any help or opinions.

Are there any penalties with taking a lump sum now? Taxes? If you don't take a hit on the money I would take the lump sum and roll it into your 401l or IRA. 

[WinterWine]

I'll be going through the same thing in a few months. I can with leave it in the Pension to grow at a pretty piddly rate, or rollover to an IRA for no fee. I'll be converting mine to my Roth IRA since that's where I have my other money, and it's a relatively small amount to pay taxes on.

[drloretta]

DH just got a letter from his employer about this. At this point we're very likely to take the lump sum and give it to our FA to invest. I don't believe there are any tax penalties.

[mushmouse]

There shouldn't be any penalties. I'll make sure I read more. I'm leaning toward a bird in the hand, and rolling it over. I hate making decisions. LOL

[delawarejen]

I have a very small pension from a second job. It was somewhere between 1K and 2K - too big to automatically cash out but too small to meet investment minimums. I've left it there because I wasn't sure of something. If I roll it over, it would be in an account by itself, right? If I could just combine it into something else (my rollover IRA comes to mind), that would be fine. Otherwise I feel like I should leave it where it is and get $40/month in 30 years. (I suppose I could cash it out, but that isn't really necessary).

[mushmouse]

I don't see why you wouldn't be able to roll it over into an existing IRA. Are you sure you have the option to cash out? Mine is a 'one time offer' kind of thing. Which is what made me wary to begin with as companies so very rarely do anything to benefit anyone but themselves. Mine is about 15K.

[mmmomof2]

I was in this position and took the lump sum and rolled it over to an IRA. I figured in 30 years the odds of the pension still existing was low, and if the company ever went out of business that ex-employees would be at the back of the line for payment.

[sillygoosegirl]

I wish I could roll my old pension into an IRA. I don't know why my former employer doesn't offer that. Last I checked, it was growing at 4%/year, and that was when interest rates were significantly higher than they are now. And at retirement, the only option will be to get it in the form of an annuity. So yeah, I'd totally roll one over if I could.

[mrsw101109]

What type of plan is this?