I apologize if this has already been covered, but I searched around and couldn't find a definitive answer.
I worked for a company that discontinued its pension plan. I am scheduled to receive a lump-sum pension payout of 75k in August 2045. How do I factor this into my asset allocation?
* Do I count the full value of it now in my bond allocation? (I don't think this is right.)
* Or, do I count it as bonds but do the math on a projected 3% annual return over a 30-year period (2015-2045?) That would make it closer to 31k in my current bond AA; if each year I bump that figure up 3% in my AA, I think that could work.
Thanks for your help.
Factoring lump-sum pension into AA
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Re: Factoring lump-sum pension into AA
How significant is this sum in your expected nest egg in 2045? If you are talking an anticipated $1M+ next egg, I would just ignore it from an AA perspective. Your AA is an inexact science to begin with, not sure this is worth your effort to "correctly" incorporate into your AA.
Re: Factoring lump-sum pension into AA
You should only figure into your asset allocation assets that you actually have on hand.
Wait until August, 2045 until you receive the cash; then use it to buy stocks/bonds in proportion to your desired asset allocation.
Wait until August, 2045 until you receive the cash; then use it to buy stocks/bonds in proportion to your desired asset allocation.
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Re: Factoring lump-sum pension into AA
Speaking strictly for myself, I wouldn't count it at all. Thirty years is a long time. I would plan around it and use it as "found money" when the time comes.
But that is me. You may wish to factor it in as some sort of fixed asset and if so I would use a bare minimum annual return.
I realize that this is not a pension and will be a lump sum payout ala a 30 year bond so if it makes you happy you can probably count it as such. I wouldn't but see no reason for the alternate approach to not be valid.
But that is me. You may wish to factor it in as some sort of fixed asset and if so I would use a bare minimum annual return.
I realize that this is not a pension and will be a lump sum payout ala a 30 year bond so if it makes you happy you can probably count it as such. I wouldn't but see no reason for the alternate approach to not be valid.