Financial People, a question about pensions

[EdiePA]

I'm leaving my job with the State of Pennsylvania after almost six years of employment. Therefore, I'm vested in the pension fund and have three options -- take a lump sum now, take an annuity or leave it in there until age 60, when I'd have to start drawing out money. (I'm 50 now.)

I'm hopeless when it comes to money questions, so my instinct is to just leave it where it is, but I'm not really sure that's best.

Any ideas??

TIA,
Edie

 

[SplshMtn99]

Lucky you!

If you don't get many answers here, consider posting on the Budget Board here on the DIS. There are alot of "experts" over there that know their stuff. Good luck.

This type of question comes up often there....even though right now its just alot of talk about after Xmas sales.

 

[momx2]

I would leave it and then you would have a small pension to draw from for the rest of your live. Plus, if you take the lump sum I think the tax penalty would be huge. I think you would end up paying around 42% in taxes.

 

[mickeyfan2]

I would take the lump sum and invest it yourself. You will then control your own destiny. See a Financial Planner before doing anything.

 

[mickeyfan2]

I think you would end up paying around 42% in taxes.

There are no tax implications as long as the OP never takes control of the money. I will need to be rolled from account #1 to account #2 (a valid retirement account that the OP would set up).

 

[golfgal]

You could roll it over into a Roth IRA or other qualified plan and continue to earn interest on that money until you are ready to use it for your retirement. Your worst option would be to take the lump sum and not roll it into something because you have huge tax penalties. You could take the annuity option if you need a regular income right now but if not, I would roll it into some other tax deferred plan.

 

[Feralpeg]

When I retired, I left my money in the company 401k plan. The plan was well managed. I knew they would do a better job with investments than I would. It has grown considerably. I had been with the same company for 30 years, so it was a sizable amount of money. I don't plan on taking anything from that plan until I am 59 1/2.

I did sell stock I had received from a company employee stock ownership plan. I paid so much in taxes. The stock was initially given to the employees and had since doubled and split several times. I ended up paying the state of Missouri (where I lived at the time) 30k and the fed 90k in one year. It was a blood bath!

Deciding what to do with investments is one of the hardest parts of leaving a job. Good luck!