Pension payout question
Is it better to take a lump sum and put it in 401k or take payments?
Terry Says
You asked about a “pension” payout. If it’s a true pension, they employer may give you a choice of a monthly check for your life (or yours and your spouse’s life) or taking a lump sum.
To find out if they are giving you a good deal on that monthly payout, go to www.immediateannuities.com and simply enter the amount of money, your age (and your spouse’s) and your state of residence. They will show you what you could get on a lifetime basis for that lump sum.
Keep in mind that the monthly payment might look enticing now, but could lose purchasing power if inflation continues.
Your other choice might be a lump sum payout that you could ROLLOVER into an IRA. Then you could make the investment decisions and take out money whenever you want. At age 72, you would be required to start taking distributions. You could roll it over directly to Fidelity or Vanguard to have a low-cost, wide choice of investments. Read this article about rollovers.
Be wary of those offering advice on investing this rollover! You can do it. But one thing you can’t do is roll your pension into a 40lk plan at work, per your initial question.