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Pension Question
I know nothing about them. My first husband had a pension with his job before he passed away. At the time of his death they wrote me a letter letting me know how much I would get a month at the time of early retirement. I just filled it away. I got an annual statement from their financials that made me call them because it still had that last name on it and I wanted to update it. I also asked them to send me forms so I could add my DH as beneficiary. So I get something in the mail from them today where there is a limited window I can take the full sum out of it, or I can get a lifetime annuity of $72/month which is nothing really to me. Or I can just leave it and collect it when I'm of retirement age. I will be calling them tomorrow and my CPA this week.
My question is do pensions get an interest each month or do they always stay the same amount. Would it be better if I rolled it into my personal IRA? I also thought I could use it to pay down most of my school loan as that is our only debt after we pay off the remaining $700 of DD's medical bill.
Re: Pension Question
I think this has to be discussed with your accountant, because based on what you've posted, there is no way for any of us to know how to advise you.
I worked long enough at a prior company to be eligible for a pension before they closed their local office and laid off several employees. This was a guaranteed pension not a 401K, which I also had. When I looked into early receipt of the pension it was quite a bit lower than if I'd waited until 65, but my monthly payments are over $1000, not $72. I would be a fool not to take it early, even though it goes down when I'm 62 to about 3/4 of the current amount.
I'd have your accountant go through the paperwork and provide counsel to you. With such a small monthly sum, you might be better to take the lump sum and invest it. If it is a substantial monthly payment at standard retirement age, it might be worth the wait, but again, have your accountant advise you.
It will be $156/month at my retirement age. Which is not that much. I plan on calling the company today to get a little more educated about the pension.
basically I take all $27,000 out now, take $72/month for life, or wait till I'm retirement age and take $156/month for life.
If I want to use the money towards a school loan or beef up our emergency fund I would get taxed and penalty. If I roll it over to my IRA there is no tax or penalty and then I could invest it with mutual funds. Part of me wants to have the cash in my hand, but the other part doesn't want to get penalized and loose some of the money.
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Agreed. You'll appreciate having taken the extra for retirement once compound interest turns it into even more. If you're on track financially already, then I'd roll it over instead of cashing it out with penalty.
@MrNibbles
I've come to that conclusion as well. I will be talking to our CPA today about it and I registered for a free webinar provided by the company with a certified financial planner. I don't NEED the money , I just hate having a school loan but whatev