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LUMP SUM OR NOT?
QUESTION:
I'm 53 and considering leaving the company I've worked at for 30+ years...
At retirement, I have the option of receiving $2500/mo till death, or $302,000 lump sum.
Since I'm too young to roll the lump sum into an IRA and receive distributions, should I just opt for the $2500/mo and hope the company stays solvent? Is there any other option I'm missing?
Lump Sum or Not?
ASK YOUR MONEY’S ROSEMARIE BOYD ANSWERS:
Dear Lump Sum or Not:
In answer to your question, the $2,500 monthly pay out is excellent. It is excellent compared to the lump sum, because if you were to take the 302K lump sum and try to buy a private annuity, given today’s interest rates, you would only receive a monthly pension, for life, of approximately $1,500 to $1,600 per month. Bear in mind that this requires you to take minimal risk but the amount will not increase over your lifetime.
Check with your employer to determine if your pension is protected by the Pension Benefit Guarantee Corporation in the event the your company were to go out of business. I suggest you log on to the PBGC web site (http://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee.html ) to determine the maximum amount of pension protected by the fund for you.
Thanks for your question,
Rosemarie A. Boyd, CFP
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