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Question for the Money Doctors

Question submitted on May 20, 2012.

Question

I am 57 years old I left a company that had a pension plan now i have the option of taking my pension amount in a lump sum payout and rolling it over or leaving it with the company until I retire .The longer i leave it, it increses in value but is it safe and i am not sure i will have the lump sum option at a later time .what would you suggest

Answer

My personal feeling is that you are better off taking the lump sum than leaving it at he company.  If you take the lump sum, make sure to "roll it over" into an IRA.  There are several reasons for this including:

1) if you die the day after you start your pension payments, generally your heirs would not be entitled to any additional money.  If you invest the pension in an IRA, your heirs would  receive the value of the IRA upon your death. 

2) You can investment the proceeds in safer investments that should grow over time if managed properly

3) if you roll it over to the IRA, the money remains "pre-tax" until you take it out

4) if you invest the money into a variable annuity that allows guaranteed income, you could have your own personal "pension" plan which would allow you a monthly paycheck for the rest of your life. 

These decisions are complex.  I encourage you to talk to a CPA Financial Planner in your area about your options.  You can find a CPA Financial Planner in your area by visiting www.findapfs.com.  Good luck! 


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