Retirement calculations
Hello Terry
Question pertains to pension calculations. I have a choice of taking a lump sum option or monthly. When calculating my money I calculated 550000 for a lump sum or the monthly option at a little over 2300 per month. I received fidelity who is holding pension and because of my age I’m 52 they factored my age and as a result I dropped to 488000 or the monthly annuity at 2069. This blindsided me a bit and now have to make a choice on what to do. Any advice on this would be greatly appreciated also any advice on the age factor when calculating a retirement pension.
Terry Says
So, do you have a THIRD choice — rolling over the lump sum into an IRA, where the money could continue to grow for many years, tax-deferred? Becuase you are so relatively young, any pension that promises a lifetime check right now is going to give you a very small account. Even if you invested conservatively, you’d probably be better off with the IRA. A pension check is a fixed amount — and at only 3% annual inflation the spending power of that fixed check will be cut in HALF in 25 years!!
So if you can do a lump sum rollover, ask Fidelity to help you do it. Invest conservatively in their Balanced Fund or Equity Income Fund. I’m sure you’ll be way ahead in the long run.
If you don’t have that option, go to www.immediateannuities.com to compare monthly payments with the lump sum amount (considering your age, gender, and state of residence) and see if the monthly check they are offering is a fair deal.
But that would be my idea of the least attractive choice — a fixed monthly check for life at this stage of your life.
