Non-vested pension money-best option?

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Non-vested pension money-best option?

Postby DVMResident » Tue Jul 16, 2013 12:10 pm

Hello Bogleheads,

My significant other (34 years old) has recently quit her job with the county government. The employer opts out of SS, but offered an optional pension. She opted into the pension fund and it makes up a large portion of her retirement fund.

She worked there for ~3.5 years, short of the 5 year vest. Her contributions plus employer match are currently worth ~$15,000.

There are 3 possibilities:
(1) Roll it over to an IRA and loss the 'years of service'
(2) Leave it in the pension fund, earning negligible interest. If she returns to country a job (even in a different department, expect the school district), her 'years of service' will start where she left off, i.e. ~3.5 years.
(3) Leave it in pension fund, earning negligible interest, never vest, and receive the lump sum at 65.

I'd say the chances of her returning to county are low given she is not happy working in large/political bureaucracies. But it's hard to predict the future over the next 30 years.

Should we roll the pension fund over to an IRA?

Thanks in advance.
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Re: Non-vested pension money-best option?

Postby hand » Tue Jul 16, 2013 12:20 pm

Questions:
1) What is "negligible interest"
2) How well funded is the pension plan
3) If she chooses to leave funds where they are, can she roll them to an IRA at a time of her choosing in the future?
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Re: Non-vested pension money-best option?

Postby DVMResident » Tue Jul 16, 2013 3:12 pm

Good questions:

hand wrote:Questions:
1) What is "negligible interest"

The interest paid to her account has averaged 0.8% per year. Interest rate are "competitive" based on "current markets", but otherwise undefined.

The AA of the fund is 96% equities, 3% commodities, 1% hedge fund. They report 2.4% returns "Gross of fees" for the past 5 years (unclear if it's nominal or geometric). Fees are not disclosed and thus real returns are unclear.


2) How well funded is the pension plan

That is a great question and something my Google-fu could not answer. I really have no idea. Do you have a good way of checking?

3) If she chooses to leave funds where they are, can she roll them to an IRA at a time of her choosing in the future?

Yes, they will continue to earn interest until we withdraw the funds, she dies, she turns 70.5, or we roll them over.

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Re: Non-vested pension money-best option?

Postby hand » Tue Jul 16, 2013 3:32 pm

Not sure there's a clear answer here or that $15k is terribly meaningful in the whole scheme of things.

I would be tempted to leave in the pension plan for a bit until there is certainty your wife won't go back to work for the county government. If you have no other IRA assets, this could have a side benefit of making you eligible for a backdoor IRA. If you end up not liking this approach, you can always change your decision in the future.

On the other hand, simplicity is a virtue, so consolidating into your other retirement holdings with a single provider would have benefits.
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