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Investing/Strategies / Retirement Investing
|Subject: Re: Pension, annuity, or payout?||Date: 9/24/2012 2:42 PM|
|Author: JAFO31||Number: 70950 of 77556|
<<<Oh, they said the lump sum payout would be actuarily equivalent to if he took the benefits at age 65.>>>
"Don't take their word for it. Find out the amount and then do your own math. The amount they might give you in a rollover could be tiny compared to $4800 a month you could take now - and invest that money if you don't need it."
$4,800 a year (i.e. 400/month) now versus
$7,2000 a year (i.e. 600 month) in the future at 65(?),
not $4,800 a month.
Otherwise, I agree with you about getting the number and doing the math.
With interest rates so low right now, the lump payment might be reatlively high and rolled into the IRA could grow quite nicely.
I do not know if state pensions qualify for PBGC coverage, but given financial problems in so many states, there is a credit risk associated with leaving the money for future pay-out.
4,800 year * 18 years is $86,400 depending upon taxation of current benefits (ignoring TMV) it takes about 36 years for the $600/month to catch up to the early take amount (86,400/2,400), which would be age 101 (65 + 36). In addition, 400 month now versus 600 month in 18 years is a CAGR of about 2.4%, which is probably barely above inflation (if at all).
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