cash balance pension - Advise

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kmssj
Posts: 1
Joined: Mon Nov 13, 2017 3:31 pm

cash balance pension - Advise

Post by kmssj » Mon Nov 13, 2017 3:47 pm

Myself and wife are retired and with SS and annuity we have enough income to meet all financial obligations
and have 7-10 k each year for vacations/unexpected expenses. House is paid for and no credit card balances.
.
I have 330 k in a cash balance account from previous employer. I did not contribute to this account and when i decide to withdraw will have choice between lump sum or various options for annuity.
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It will continue to grow and my plan is to leave it in account until i reach 70 which is another 5 years and then take lump sum,
this year it grew monthly at a yearly interest rate of 3.87 % with is reset each year. I don't anticipate future rates to be lower and may increase. Balance at 70 would currently be at 415 k and there are no fees associated with account.
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Just looking for comments on advantages/dis advantages to this plan.

Thanks.....

dbr
Posts: 23709
Joined: Sun Mar 04, 2007 9:50 am

Re: cash balance pension - Advise

Post by dbr » Mon Nov 13, 2017 6:15 pm

That question is hard to answer without knowing all your other assets and how they are invested. You might want to post according to the scheme outline here: viewtopic.php?f=1&t=6212

One likely piece of advice is that additional annuities are not indicated when you already have all the income you need from annuities, etc.

The real decision is what you want to do with your wealth -- keep it as safe as possible, grow it as much as possible, keep a balance between the two, etc.

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g$$
Posts: 417
Joined: Wed Dec 21, 2011 12:17 am
Location: San Francisco

Re: cash balance pension - Advise

Post by g$$ » Mon Nov 13, 2017 6:31 pm

Here are some very brief general comments about cash balance plans:

Advantages:
- Generally, the account cannot lose value. It can only increase.
- You're earning an above average rate on the assets. Good luck finding a risk-free 3.87% per year in a savings account.
- While the money is in the pension plan it is protected from creditors. This could be useful in the unlikely event of bankruptcy.
- If you decide to annuitize you will probably get much higher payout from the plan that you could find on your own in the individual market.

Disadvantages:
- It's boring. 3.87% per year!
- There is a risk your former employer could go bankrupt. The plan is probably insured by the PBGC for this risk, but it's still a hassle.


My advice? Wait as long as you can to take it out. Think long and hard about the lump sum vs. annuity decision at that time.

-g$$

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