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Subject:  Re: Cashing out Pension to IRA? Date:  12/31/2003  12:53 AM
Author:  jtcnet Number:  38324 of 88827

I just took a lump sum on my pension rather than opt for the monthly payments for several reasons.

1) Interest rates are low right now - what this means is the lump sum payout is generally higher than it will be if the interest rates rise (which they will do some day).

2) If I were to depart from this world, the monthly pension will go away. But if I take the lump sum and put in an IRA, my heirs will inherit the money. Or I could give this to the charity of my choice.

3) I did the calculation that is similar to the one in an earlier poste and found out that I would need to earn about 6% Cumulative Annual Growth Rate in my IRA to equate to the monthly pension payout and not wittle down the principal. This seemed ok (I could buy a 30-year bond at 6% - although this is probably not a good idea in todays market).

4) The monthly pension is not inflation protected. If I were to invest the IRA funds in inflation rate protected bonds (TIPS), I might be better off.

5) As I understand it, the USGov is after companies who don't provide the facts on the lump sum payout versus the monthly pension. There is risk associated with the lump sum in that one could invest poorly or the market could go poorly. Be very careful here - because one's retirement fund risk is magnified.

Happy New Year,
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