The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: Cashing out Pension to IRA?||Date: 12/30/2003 4:37 PM|
|Author: BuildMWell||Number: 38314 of 78166|
"I'm unsure of how to measure the performance of the pension.
All I know is that by age so-and-so, I'll receive X dollars per month and that I can cash out now (approx $30,000)." - lyates1
To me, that is the key here. If you know the monthly payout at age 65, you can pretty well figure out the yield on the account. If that yield is satisfactory, stick with the pension...if not, roll it over and start self-directing the funds.
Let's say the payout is $500/month at age 65. That is $6000/year 13 years from now. The series present value factor at 6% for 20 years (age 85) is 11.470...so your $6000/year is worth about $68,820 at age 65.
Now, we can work that number backwards to the present day. $68,820 in 13 years versus $30,000 today is a present value of 2.294. This equates to a compound yield of 6.59%. Thus, it seems to me that your pension would yield slightly better than 6% if you left it alone AND if it promised to pay you $500/month.
Based on all this, look at the monthly payout. If it is und