Guys, I'm a pauper for the most part. Lost 100% of my 401K in a divorce 12 years ago and had to start from scratch (love Oregon divorce laws). I have a 401K at work and a couple of small IRA's and I hope ABM will give me a few hundred thousand from his wealthy fiance, but I'm not holding my breath. So here's the deal. When I left Farmers (after 7 years) I was informed I was to get a small pension of $350/mo when I turned 65 based on how the fund investments go and when I died the pension dies with me (no option for a spouse). Now, due to poor fund management and the economy, they have sent me a letter and I have a host of options and 30 days to make a decision as things have changed: 1) Take a lump payment of $26,000 and the account is closed. 2) Wait until age 65 and now it's down to $267/mo until my death. 3) Take an immediate monthly payment of $136 (I'm age 55) until I die. 4) Take an immediate monthly payment of $126 until I die and then my spouse receives $63 until her death. 5) Take an immediate monthly payment of $121 until I die and then my spouse receives $91 until her death. It seems best to me to take the lump sum payment. As I will have no life insurance when I retire anymore, I want to possibly buy a paid up annuity with a guaranteed rate of return (I know it'll be small) and maybe see is a small life insurance rider can be added (I've heard of 3% riders at no cost, or, I'm willing to pay an addition $25/mo for a $25,000 life insurance rider...). Does anyone have a suggestion or two or maybe point me in the right direction. I'd like the money to be non taxed when I move from this current pension fund to where ever I decide to place it. Thanks!
Looks to me like the $136/mo is 6.3% return on the $26K You're not going to get that from a bank if you took the $26K option. Anything else isn't guaranteed to preserve your capital (the $26K). That is, there's risk if you try to make 6.3% or more. The thing is, you won't have the $26K anymore. But please, get better advice than mine. Ask a professional, like a CPA or an investment advisor.
That's why I'm here. I started with Northwestern Mutual, but their idea was for me to cash out, take the 30-40% tax hit and then buy a whole life plan with a value of $50,000 that I'd have to pay $2,500/year for 10 years to get. I don't want to take the tax hit if I can help it. Also, the cash surrender value in the plan is a joke. There has to be something better than that.
Like I said, what are you going to do with $26K (and pay taxes on it) that gets you 6% return for life? You'll lose the $26K - like you won't be able to cash in for the $26K if you need it. That's the only downside. The thing is, I'm no expert and I don't want to be the guy you rely on for this kind of advice. So think about if what I said makes sense, then ask an expert.
BP, it's a simple calculation. Just tell me how long you plan to live, how much longer your spouse plans to live after you croak, and what the interest rates will be each year between now and then. barfo
I know, it's impossible to really say.... buuuuuuuuuuuuuuuut.... With various maladies and bad genes, I expect a short life. On the other hand, wifey will live 'til she's 90 as she's very healthy and has great genes. What I really was hoping for was something like a plan my boss has- He gets a guaranteed rate of return of 5.5%, less expenses of 2.9%. So his true guarantee is 2.6%, but on a quarterly basis he gets to keep everything above the 5.5%. In addition, he gets a life insurance rider of 3% per year on his total investment. The plan lasts for 12 years and can be renewed. I'm trying to get in on that one but the investment guy lives in AZ and hasn't returned emails as he is out of town. Anyway, next week I'm meeting with a Guardian agent and see what they have to offer. If worse comes to worse, I'll open an IRA and dump it in some bond fund for security..
