No. of Recommendations: 2
... I can manage the 700K lump sum into yields of about 20%/yr..

This is not realistic, but I suspect that you won't take our word for it and will always grumble about how well you could have done if you only got a chance.

Since it sounds like you have ample means I would assume that you also have money in other retirement accounts. If this is the case, you could test your skills and transfer $50K into a separate IRA account and try managing that yourself. If you can really get the 20% per year, then it should go steadily upwards and a little bit over 8 years it will be worth half a million dollars. (This assumes that you can afford to loose most of the $50K.)

To make this test fair you will also open a separate account for $5,000 which will be invested in a low cost total stock market index fund with all dividends reinvested. In theory your managed account should always be more than 10 times your index fund if you can at least match the index. The catch is that if your stock fund is ever less than 8 times the index fund when you get your quarterly statements, then you will have to concede that you can't even do as well as an index fund(much less 20% per year) and you will convert the stock account into index funds.

You will have to also agree that if you should do very well with your investments, that there is a chance that it was just luck, and you will not EVER transfer more money into the stock account. If you let a hundred monkeys pick stocks a few of them will do well, you could just be a lucky monkey for the first few years.

.... Is my wife smarter than me?...

She must be, because if you can really invest that well then you could have retired decades ago on your investments. Even if you enjoy your job, why did you make your wife work all these years!!!!! (just kidding)

...My wife says that our combined DB is equivalent to someone else's 401K of about 3.3Million.(at a 4% withdrawl rate)..

To calculate the value of you pension you can go to an annuity calculator on the Fidelity or Vanguard web site and plug in your numbers (with the inflation adjustment) and find out how much an annuity would cost that yields the same amount. This would be the approximate value of your pensions. I didn't crunch the numbers, but it will probably be much less, probably in the ball park of the amount that you can cash it out for.

...We are both long time public employees with define benefit plans...

Private employees with pensions like yours are getting shafted all the time. The public pensions requirlemts are huge, I wouldn't bet my entire retirement that public employees will safe for the next 50 years. The decision as to take the benefit or cash it out may not need to be ablack or white decision. It could be that you could do something like take half the cash and half the pension and end up with an inflation indexed $5,250 per month and a check for $350K. It would be good to get a fee only(by the hour) financial planner to look at your situation. (If they try to sell you an annunity a fund with a load, you are likely getting taken for a ride, run!!)

Greg
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