Ask Terry Questions 401k lump sum payout/rollover

401k lump sum payout/rollover

By Terry Savage on October 12, 2019 | Financial Planning / Retirement

Hello Terry,
I have the opportunity to take a lump sum payout of a pension from a previous employer. My retirement date is 2nd Quarter of 2033. The lump sum is $30,0000. If I leave it in the pension fund, it will mature to $51,000. If I take the highest payout at retirement, it will take 5-3/4 years to get that $30,000, if the company is still around to payout the pension.
I’m wanting to roll it over into my existing Fidelity 401k. Is this a good idea? With having 10-15 yrs until my retirement, what type of risk should I be putting my money into?

Thank you,

Terry Says

The Pension Benefit Guaranty Fund is supposed to make your future pension secure, but I understand your concern.  My suggestion is to roll it over — but not to your current 40l(k).  Instead have Fidelity or Vanguard roll it into an IRA Rollover account. That way you will be sure to avoid taxes and have a wide selection of investment opportunities. And I think it’s “cleaner” to have the account be separate from your current 401(k).  The only exception is that if you think you might be sued, there is a slightly greater protection for 40l(k) accounts than IRAs (in most states).

Here’s an interesting article that goes into this issue in greater dept.

Recent Financial Planning / Retirement Questions



a personal
finance question