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My husband and I retired this year, and this was indeed the most difficult question for us. I am STILL debating on one part of my plan - about whether or not to take a monthly pension or take the cash settlement to rollover into an IRA.

The pro of taking the pension is that there is not a 10% IRS penalty for early withdrawal (I'm not 59-1/2). You also have a (pretty safe) guaranteed life-time income. The con is that you relinquish control of that money to others - my former company buys an annuity from an insurance company to provide me with the pension.

The pro of rolling over to an IRA is that I keep control. The con is that, in order to avoid the 10% penalty, I will have to take a certain amount out each year at least for 5 years, based on complicated IRS life expectancy calculations. Aaah, me.

For simplicity's sake alone, I am leaning toward taking the pension instead of rolling it over. We have set aside enough cash in a money market for about 3 years - our Credit Union assisted us there by setting up a new-to-them program to make monthly deposits into our accounts. Most of the rest of our portfolio is in stock market mutual funds, where we will leave it for the time being. We will decide at the end of the 3 years how to go from there.

To tell the truth, I am just having too much fun being retired right now to sweat all the planning, so am trying for simplicity. Husband and I just got back from 2 months in Costa Rica!
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