Were you offered a lump sum for your pension and turned it down?

[havaneselover]

Very much a regional thing. As I have learned on this board there are places that teachers are not well paid. This is an area with well compensated teachers, starting $43,196,topping out at $87,219 after 10 years. 9 month contract. Stipends for teaching summer school and for coaching a sport or leading band etc. Retirement is maxed out after 30 years service, and while you have to be 50 to retire, not sure how it's possible for most teachers to start work before about age 22 if they finish their degree in 4 years.

This is a tangent, but I went to UVa and had a girl on my hall who graduated at 17 or 18 with plans on becoming a teacher. You can get into college in some weird programs at 13 or so with decent SAT scores. She did two years at another school (Mary Baldwin through their program for the "exceptionally gifted") and transferred in. Why on earth her parents thought this was a good idea I will never understand. And I did graduate at 20 (started at 17 and finished in three years).

 

[tvguy]

This is a tangent, but I went to UVa and had a girl on my hall who graduated at 17 or 18 with plans on becoming a teacher. You can get into college in some weird programs at 13 or so with decent SAT scores. She did two years at another school (Mary Baldwin through their program for the "exceptionally gifted") and transferred in. Why on earth her parents thought this was a good idea I will never understand. And I did graduate at 20 (started at 17 and finished in three years).

Yeah, I went to college with a guy who started college at 16, and graduated at 20. He's 52 now and says he wasn't emotionally mature enough for college. Took him about 10 years to get his life in order.

 

[jesse8931]

Like anything I will always take the lump sum.

How do you know how long you will be able to draw ?

you could die two weeks or the company goes under.

While 22k isnt much in the long term and even with you getting 1.1% interest you would run out of money in 5.5 years.

Anyway you look at it 340 a month is not much and even combined with ss I doubt that would allow you to retire.

What I would do is take the lump sum and depending on how long you have till you retire you could retire with a 100k.

 

[lost*in*cyberspace]

I'm still trying to wrap my mind around the fact that someone's pension is only worth $22,000.

 

[tvguy]

I'm still trying to wrap my mind around the fact that someone's pension is only worth $22,000.

I will have 10 years into my Pension plan come December, and mine is worth $2,300. But the company discontinued the actual pension portion 3 years ago, so all we have is the option to cash it in when we leave. We do have a 401k with a 3% match, and that is far more valuable.

 

[tvguy]

I will have 10 years into my Pension plan come December, and mine is worth $2,300. But the company discontinued the actual pension portion 3 years ago, so all we have is the option to cash it in when we leave. We do have a 401k with a 3% match, and that is far more valuable.

My mom's pension plan had a cash out value of $60,000 after 37 years with the same employer. She took the pension option and drew benefits for 27 years.......and drew out nearly $180,000 according to the disclosure forms I got after she passed away. Those papers also stated that the average member of the plan draws benefits for about 11 years. So, like a lot of things, deciding which option is best would be easier if we knew how long we were going to live.

 

[SomePixiedust]

If you take the lump sum wouldn't you be subjected to a penalty for withdrawal under the age of 59 1/2? If so, could you roll it into an IRA or a 401K and avoid a penalty? (I don't know if it even works that way) I'm in the same boat and have to make a few phone calls on this.

 

[mefordis]

I don't trust the pension so I took the payout. Bird in the hand.

 

[mefordis]

If you take the lump sum wouldn't you be subjected to a penalty for withdrawal under the age of 59 1/2? If so, could you roll it into an IRA or a 401K and avoid a penalty? (I don't know if it even works that way) I'm in the same boat and have to make a few phone calls on this.

Yes roll it over directly and there are no penalties. Don't cash the check - sign it over to your ira or 401k.

 

[mefordis]

I want to add if you take the lump sum check and cash it the government takes the majority of the payout. It is taxed as ordinary income, plus you get hit with a big penalty. It ends up being less than half of the amount in some cases, depending on your tax bracket. Don't do that unless you are seriously hurting for cash.

 

[SomePixiedust]

Yes roll it over directly and there are no penalties. Don't cash the check - sign it over to your ira or 401k.

This is what I am leaning towards, and I think there is an option for the funds to be directly sent to my 401K holder.

 

[seb65]

These government pension plans are what is bankrupting these states to begin with and need to be overhauled to 401k plans like most of the rest of us have. We pay $6000 a year school tax (for a modest middle class house) because teachers in our area are retiring with pensions that are 80% of their highest salary. So we are paying for our own retirement along with thousands of other people's. Something needs to change soon!

I am a teacher and fund my pension myself- 13% of my salary. I suppose different state, different rule. I pay taxes, but not a school tax. It is up to the town how to disperse the taxes.

 

[tvguy]

Yes roll it over directly and there are no penalties. Don't cash the check - sign it over to your ira or 401k.

They will need to know before they cut the check if you are rolling it over, or spending it. They will make the check out to FBO (For Benefit Of) your IRA and not withhold taxes. Otherwise, they will automatically withhold the 20% penalty plus some tax.

 

[vacationer1954]

If you take the lump sum wouldn't you be subjected to a penalty for withdrawal under the age of 59 1/2? If so, could you roll it into an IRA or a 401K and avoid a penalty? (I don't know if it even works that way)

Generally, the way it works is that you can roll the lump sum directly into an IRA, and therefore avoid all current tax implications.

 

[eliza61]

This is what I am leaning towards, and I think there is an option for the funds to be directly sent to my 401K holder.

If the new ira is with a major company say vanguard, fidelity or even a big bank, many company plans will do it electronically. a few years back when my company split and I had an old 401K that was managed by Merrill lynch, I moved it and it was all done electronically. they did not have to send me any thing.

this was a 401K to an IRA not a pension so check, the rules with a pension maybe different.

 

[kaytieeldr]

My DH has a small pension from a company he used to work for. That pension is terminating and our options were: lump sum payment, immediate annuity, deferred annuity. He went with the deferred annuity (contract will be purchased from an insurance company) and will take payments at retirement age (he is currently 48). The lump sum was $16,000; the monthly deferred annuity payment is $251/month.

Interesting. Did he have a mid-October deadline? His situation sounds very close to mine - maybe we worked for the same company...