Early Pension Buyout

[tqf258]

I received a mailing the other day from a previous employer about a pension buyout coming.
Im currently 44 and since i left the company early I don't have access to the money till I am 65 and the only option I have is monthly payments. The monthly benefit is ~$1600
Im wondering what the offer will look like and what # would make sense to accept or decline.
Has anyone had experience with early pension buyouts? Pros/Cons Advice
I should get an offer in the next few weeks just trying to do as much preparing as it seems like it will be a small window to accept of decline the offer.

[disneysteve]

There are various "lump sum vs annuity" pension calculators. Here is one: https://www.dinkytown.net/java/pensi...alculator.html

[tqf258]

The problem with most as well as the one you mentioned assumes the person is closer to retirement age, The one you linked starts at age 50

[bjl584]

What is the buyout amount?
The math might tell you to take the offer, but it depends on the amount and how you would invest the payout

[tqf258]

Havent gotten the offer yet, just a notice to be ready when it comes.

[Like2Plan]

How much of an annuity could you purchase with the lump sum? Does it compare favorably with the monthly benefit. Does your monthly benefit have any cost of living increases?
Is your pension covered by the pension benefit guaranty corporation?

Pros to the lump sum payout. You could roll it over to an IRA and do conversions to Roth on your own schedule. If you receive a monthly benefit you can not control the timing of the income.
Depending on how you are invested, the lump sum might be better able to keep up with inflation.
More beneficiary options with the lump sum (vs pension which typically only provides for survivor benefits for a spouse).

Pros to the monthly benefit--it is guaranteed and keeps paying through thick and thin. The lump sum could run out before your expiration date.

[tqf258]

So i received the offer in the mail. The lump sump buyout is a little over 119K. I can roll to IRA or current 401k or can take a withdrawal and pay taxes and 10% penalty.

[disneysteve]

So i received the offer in the mail. The lump sump buyout is a little over 119K. I can roll to IRA or current 401k or can take a withdrawal and pay taxes and 10% penalty.

Forget that the cash out option even exists. That’s a non-option in my mind.

I’ll leave it to others to run the numbers on how to handle the rollover.

[tqf258]

I want to forget that of exist! But am tempted by the fact that i could pay off everything i own except for the house and open up ~2k/month cash flow. Its where kinda following Ramsey at one time makes me consider it.
Investment wise we are in decent shape, I think, we have between 750-850k depending on the market and with our 401k's are both putting in 15%+ with our company matches. Salaries total 170k+/year.

[Jluke]

You have 100k in debt and that doesn’t include your mortgage?

[tqf258]

You have 100k in debt and that doesn’t include your mortgage?

Not quite 100k, but yes 2 fairly new vehicles

[srblanco7]

Despite the heavy debt load, there's no way I would consider the cash out option. Paying taxes + penalty (and state taxes) means you're likely paying 30-35% on that withdrawal to payoff car loans. You mention Dave Ramsey and as an occasional listener to his podcast, I'd suggest that he'd never advocate cashing out a retirement account to pay off car loan debt. In fact, he'd suggest that you have too much car loan debt at more than 50% of your current income. If you're interested in getting out of car loan debt suggest that you consider selling one or both of those cars (especially given how hot the used car market is right now) and stepping down in car. I have a special hatred of car loan payments and $2k/month (for me) would be an egregious burden.