rockycro
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 20 Sep 2013
Location: NJ
|
| Pension vs IRA |
 |
|
I recently left a government job for work in the private sector. I have the option of leaving my pension contributions with the state or rolling the money into an IRA. I am 31 years old. I could not collect the pension until I am 55 with penalties or 62 with no penalties. The full value of the pension (at age 62) would be about 15,000 per year. The current contribution balance that I could roll over is around 24,000.
Do I take the money and put it in an IRA or leave the money and collect the pension in 30 years?
Thanks.
|
Fri Sep 20, 2013 1:45 pm |
|
|
oldguy
Senior Member
Cash: $ 751.85
Posts: 3656
Joined: 21 May 2006
Location: arizona
|
|
|
|
My situation wasn't a lot different than yours altho it was all in private industry. (I'm age 74, retired @ 60). Our company switched from pension to 401k when I was about 40. My pension is in the $15k range, SS about $24k - and my 401k had about a million in it when I retired - it's quite a bit more now, I take out RMD every year since 70 1/2. The biggest part of my wealth (and current income) is the 401k.
It depends mostly on your investments. Your $24k lump, placed in an 11% index for 30 yrs is $550,000, That could spin off $27k/yr when you start drawing it.
30 yrs of 401k input at max (now $17,500/yr) at 11%/yr would be $3.8M - so that is where your major family wealth will occur.
At retirement you will probably move your $3.8M into a Rollover IRA - so the $550k & the $3.8M would be in the same place, same investments, same rules - ie, RMD at age 70 1/2. No diversification, all eggs in that basket. For that reason alone I would keep the $15k/yr annuity (even that doesn't mathematically optimize your wealth it buys some insurance in the form of diversification.
BTW, will your govt pension & your SS pension be subject to the WEP cap? (My civil service engineer friends got dinged when they retired.)
|
|
Fri Sep 20, 2013 3:24 pm |
|
|
Anton Martin
Full Member
Cash: $ 15.00
Posts: 73
Joined: 23 Nov 2012
Location: Florida, USA
|
| Re: Pension vs IRA |
|
|
quote:
Originally posted by rockycro
I recently left a government job for work in the private sector. I have the option of leaving my pension contributions with the state or rolling the money into an IRA. I am 31 years old. I could not collect the pension until I am 55 with penalties or 62 with no penalties. The full value of the pension (at age 62) would be about 15,000 per year. The current contribution balance that I could roll over is around 24,000.
Do I take the money and put it in an IRA or leave the money and collect the pension in 30 years?
Thanks.
I have similar opinion as coaster and would suggest you put the money into IRA instead of keeping it with the state. As you are only 31 right now and it will be a while before you would be able to collect your pension, and the situation can be a lot different from what it is right now.
|
|
Tue Sep 24, 2013 3:08 pm |
|
|
clydewolf
Senior Member
Cash: $ 50.25
Posts: 248
Joined: 27 May 2012
|
quote:
Originally posted by coaster
You might want to do some research into the soundness of the NJ state pension system. Whether or not the money's going to be there in 30 years to cover the pension obligations is a real question mark for some states. I don't know anything at all about NJ. We had one member from Califormia who opted to take his state pension money now. That state's finances are a horrible mess.
Federal law prohibits a state from filing bankruptcy.
|
|
Tue Sep 24, 2013 11:51 pm |
|
|
HerbertH
Member
Cash: $ 3.40
Posts: 16
Joined: 29 Jul 2013
Location: Orange, CA
|
What if Detroit bankruptcy is followed by New Jersey!! Chaces are quite low though.
“While more than 20 counties and municipalities and authorities in 10 states have filed bankruptcy since 2003 because of poor financial practices or unsustainable pension debt, New Jersey has not had a local government bankruptcy since the Great Depression.” – Source: NJ.com
I suggest try to hedge your retirement finances and don’t leave it vulnerable even to a least-likely-to-happen economic catastrophe.
|
|
Wed Sep 25, 2013 11:49 am |
|
|
|
