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What would you do? Early move of pension
Posted on 4/24/23 at 2:56 pm
Posted on 4/24/23 at 2:56 pm
Wife has a W2 job with 10 years experience.
Options- Can pull the $ contributed now (32k) 35% tax penalty. Or leave it in, when she's 60, (in our 30's now) will draw about $1100 for remainder of life.
(If it's left in- will draw 1% interest and keep the match (14%) the state has put in.)
There's no penalty to roll it over into a 401k/IRA type account from what I'm understanding, so that's an option as well.
Options- Can pull the $ contributed now (32k) 35% tax penalty. Or leave it in, when she's 60, (in our 30's now) will draw about $1100 for remainder of life.
(If it's left in- will draw 1% interest and keep the match (14%) the state has put in.)
There's no penalty to roll it over into a 401k/IRA type account from what I'm understanding, so that's an option as well.
This post was edited on 4/24/23 at 3:01 pm
3
Posted on 4/24/23 at 3:14 pm to Billy Blanks
I would roll it into a 401k.
32k over the next 7 years with fairly conservative 7% return would be 256k. That money would remain invested to some degree while you begin drawing on it. Assuming 85 year life expectancy, you would draw a total of between 250-300k draw on the pension. I would think you have a great shot of beating that return with there capital remaining invested as you draw.
32k over the next 7 years with fairly conservative 7% return would be 256k. That money would remain invested to some degree while you begin drawing on it. Assuming 85 year life expectancy, you would draw a total of between 250-300k draw on the pension. I would think you have a great shot of beating that return with there capital remaining invested as you draw.
Posted on 4/24/23 at 3:20 pm to GeauxTigers777
quote:
you would draw a total of between 250-300k draw on the pension
Wouldn't she choose this option? Guaranteed while the other would not be.
Posted on 4/24/23 at 6:44 pm to Billy Blanks
Is there any chance she can go back into the plan at a later date? Fast forward 20 years, now late 50s children out of the house, could she work in the plan again?
Also does where you live tax pension income?
Also does where you live tax pension income?
Posted on 4/24/23 at 7:45 pm to Billy Blanks
One reason to do rollover instead.of pension would be survivorship. What happens when she passes away? With rollover, spouse or other beneficiaries inherit remaining principle.
With a 4% safe withdrawal rate assuming account grows to $250k you could draw down $10k per year (plus annual inflation adjustment after year 1) with very high probability of not depleting principle and a decent chance it continues to grow and is inherited.
Is the pension inflation adjusted? Is the pension fund healthy? Pension benefits arent necessarily guaranteed either if the plan cant meet future obligations.
With a 4% safe withdrawal rate assuming account grows to $250k you could draw down $10k per year (plus annual inflation adjustment after year 1) with very high probability of not depleting principle and a decent chance it continues to grow and is inherited.
Is the pension inflation adjusted? Is the pension fund healthy? Pension benefits arent necessarily guaranteed either if the plan cant meet future obligations.
Posted on 4/24/23 at 7:59 pm to Billy Blanks
quote:
There's no penalty to roll it over into a 401k/IRA type account from what I'm understanding, so that's an option as well.
Without knowing more this would be the way to go.
Posted on 4/24/23 at 8:38 pm to TorchtheFlyingTiger
quote:
Is the pension fund healthy?
yes
quote:
Is the pension inflation adjusted?
Historically yes, but new governor is trying to make it not.
Posted on 4/24/23 at 8:39 pm to TorchtheFlyingTiger
quote:
What happens when she passes away? With rollover, spouse or other beneficiaries inherit remaining principle.
Need to look into this.
Posted on 4/25/23 at 5:52 am to Billy Blanks
My assumption is she is a teacher. I would leave it. If she chooses to work again, then she will get extra years. In GA they average top two years and you get 2% per year, and you get social security on top of that.
She might go back and work (even as a parapro or something) and she would still accruue years.
I am a career changer. I have 10 years in. Don't think I'll make 30 but shooting for 25. My salary will be over 100k by then so 50k a year, plus social security, plus wife's social security, plus 4 mill in 401k (assuming market remains ok), and we should be ok with enough to pass down to our kids.
She might go back and work (even as a parapro or something) and she would still accruue years.
I am a career changer. I have 10 years in. Don't think I'll make 30 but shooting for 25. My salary will be over 100k by then so 50k a year, plus social security, plus wife's social security, plus 4 mill in 401k (assuming market remains ok), and we should be ok with enough to pass down to our kids.
Posted on 4/25/23 at 8:15 am to Billy Blanks
quote:
There's no penalty to roll it over into a 401k/IRA type account from what I'm understanding, so that's an option as well
This is the option I would choose
Pensions get looted. In both private and public sectors
Posted on 4/25/23 at 12:54 pm to Boss
quote:
In GA they average top two years and you get 2% per year, and you get social security on top of that.
Currently it's average of 5 in Arkansas. New governor is currently trying to get rid of COLA increases however.
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