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best way to take pension spouse survivor refund

By Terry Savage on November 22, 2020 | Financial Planning / Retirement

Since I just retired at age 65 without a spouse, I have to decide how to take the refund of $32,000 I am due: Lump sum, In annual monthly payments or roll over (50% tax deferred) into a 401k or IRA?

I am fairly healthy, so seems the main issue is whether investment returns will be robust enough with a rollover given the current market status and my need not to take high risk in the market due to my age.

The monthly annuity payout of $255 will occur for my lifetime, even after the $32,000 amount is received. If I die earlier than reaching the $32,000 amount, my beneficiary receives the remainder.

I could also just take a lump sum less 20% tax withholding.
Thank you for the principles I need to apply!

Terry Says

That is a BIG financial planning question — and I’d need to know a lot more about you and your situation to give you a realistic answer. You see the bawsics: one promises you lifetime income, while the other (doing a rollover) requires you pay taxes on at least half of it and pay taxes now.
YOu need a certified financial planner to help you answer this question — doing the math. Click on the box in the top right corner of my website to find one.

Right now, you need an estate plan, plans for healthcare, (do you qualify for Social Security and Medicare?) and a living plan that is realistic. I don’t know where you plan to live, and your monthly costs. Sorry, I’d love to help, but can’t do this blindly. One thing for sure — try to keep at least half of it growing tax-deferred to keep up with future inflation. A monthly check that looks fine now could have its buying power cut in half during your lifetime at only 3% inflation!

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