Retierment Lump sum or monthly payment

[vin574]

My wife has a small pension from many years ago, that she is eligible to collect now. She's 59 1/2 years old. We're trying to figure out the advantages to either take monthly payments or a lump sum. We we're thinking about a roll over to some kind of IRA account. Yet the monthly payment for life sounds tempting.

If we do take a lump sum what would be the best way to maximize it as far as taxes and investment?

Monthly p/o 280
Lump sum 53,000

TIA

[disneysteve]

My wife has a small pension from many years ago, that she is eligible to collect now. She's 59 1/2 years old. We're trying to figure out the advantages to either take monthly payments or a lump sum. We we're thinking about a roll over to some kind of IRA account. Yet the monthly payment for life sounds tempting.

If we do take a lump sum what would be the best way to maximize it as far as taxes and investment?

Monthly p/o 280
Lump sum 53,000

TIA

Don't take the monthly payout. Get the money into your hands and keep it there. What happens if she takes the monthly check and she passes away. There goes that money.

Do you actually need that money now? If so, take the lump sum. If not, roll it into an IRA and keep it invested until you do need it.

[Wino]

$280 is approximately 0.5% per month or right around 6.34% per year. If you can put that money into an account and NOT touch it, then even at 5% per year, you'll be well over the $280 per month in less than 5 years, and the longer you go without touching it, the more your monthly income will be.

This one is a no-brainer. If you need the money to pay off credit cards, you immediately get more than 6% return. If you don't need it immediately, it becomes more than 6% return almost immediately as well. I could work up a complete spreadsheet, but this one is clear enough with just a calculator.

[Petunia 100]

If she chose the monthly payout, would it be indexed for inflation? If yes, how is that calculated? Are there any survivor benefits? Is the pension well-funded?

[vin574]

We don't need the money to live on and we don't have any debt.

The pension is not tied to inflation or any cost of living indexes.
It will always be 280 a month.

There are survivor benefits available. They would all reduce the monthly payments.

It's held and funded by the employer (BOA).

[bjl584]

Take a lump sum and roll it into an IRA. It will give you full possession of the money and total control over it.

[vin574]

That's it then. It'll be an IRA rollover.

Thank you all confirming it for us.

It's nice to have more sets eyes and ears to get views from.

Great site, great members.

TY

[~bs]

It depends. Is the entire 53k tax free? If so, I'd say to go for it, then invest it. If a large portion is to be taxed, and you dont' need the money immediately, I'd go for the monthly, and dump that into an investment account.

The 53k is equivalent to 15 years worth of payments. Or payments until she's 75. If the 53k is expected to be taxed, then I'd opt for the monthly payment, since it will spread out taxable income over a longer period, and she will be able to collect it until she dies. if going by actuarial estimates, then at least until she's 85.

[Petunia 100]

We don't need the money to live on and we don't have any debt.

The pension is not tied to inflation or any cost of living indexes. It will always be 280 a month.

There are survivor benefits available. They would all reduce the monthly payments.

It's held and funded by the employer (BOA).

That makes the decision easy. Roll it into an IRA. Choose a quality custodian who isn't going to chip away at your money with high fees (think Vanguard, Fidelity, or T. Rowe Price). Choose a moderate balanced fund, something like 50-60% stocks, the rest in bonds. That will allow your money to grow at a reasonable pace without too much volatility.

Sounds like you and the misses have done a good job preparing financially for retirement. Congrats.

[Snodog]

There is no clear cut answer. 6.3% is pretty good for a 59 year old female. A lot depends on the expiration date on her birth certificate. If she is in good health and her relatives live into their 90's I'd say keep the pension.

[The_Wiz]

Just depends on your specific situation. What debt do you have to pay off if any? Can it relieve you in some area that's a stain right now? What if she passes away? All depends on your specific situation and your need/wants/goals.

[Anton martin]

Take lump Sum Amount

My wife has a small pension from many years ago, that she is eligible to collect now. She's 59 1/2 years old. We're trying to figure out the advantages to either take monthly payments or a lump sum. We we're thinking about a roll over to some kind of IRA account. Yet the monthly payment for life sounds tempting.

If we do take a lump sum what would be the best way to maximize it as far as taxes and investment?

Monthly p/o 280
Lump sum 53,000

TIA

I would like to say that you should take lump sum amount, as you take lump sum amount you will be able to invest it to other entities like stocks, Annuities and there are few more options those you can look for. You can also take help from certified financial advisor who can help you for investing your money and can prepare your financial & investment plan accordingly.
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