I have a meager pension from a previous employer (bought out by my current employer), and they're discontinuing the pension plan.

I have 3 options for redistribution:

Roll over to my current 401K. Somehow, I lost 30% of my savings after 9/11 and this has me quite nervous.

Turn it into an annuity. This one is really vague as I have no spouse and little info provided if it can be left for my son. What info I do have is disturbing on many levels. They give my savings to a life insurance company who doles it out at a later date of my choice, at a rate I choose (within limits).  So... they keep my money, earn interest on it (not me), and spit it back at me a bit at a time. The documents presented to me claim the annuity route will be considered as income by the IRS and taxed accordingly. In my case, that would be 27-35%.

Cash it out and pay 20% taxes on it. Put it in savings, or otherwise invest it with minimal exposure. Sounds like a no brainer to me, but I'm ignorant in retirement financial matter.

What say you Pellet Fans?

 

I too am ignorant in retirement financial matters but unless you need the money now, I'd roll it over to your 401K and let it grow tax free until you need it.   

Roll over to my current 401K. Somehow, I lost 30% of my savings after 9/11 and this has me quite nervous.

If you lost money it is only because you sold in a panic instead of just riding it out.  This is where your lump sum should go and your whole balance should be in a good, low cost (under 0.5% fee) target date fund.  These funds are a mixture of stocks and bonds that is adjusted to be more conservative as you age.  They are a reasonable choice for unsophisticated investors.  Then, no matter what, DO NOT SELL if the market goes down.  Just stop watching your balance.  In history, the US market has always recovered from bubbles and other surprises.  Usually within 2-4 years.

Turn it into an annuity. This one is really vague as I have no spouse and little info provided if it can be left for my son. What info I do have is disturbing on many levels. They give my savings to a life insurance company who doles it out at a later date of my choice, at a rate I choose (within limits).  So... they keep my money, earn interest on it (not me), and spit it back at me a bit at a time. The documents presented to me claim the annuity route will be considered as income by the IRS and taxed accordingly. In my case, that would be 27-35%.

Annuities offered by insurance companies are usually fee-heavy.  I would consider this ONLY if the annuity is offered by TIAA or Vanguard.  But, really, just rolling your lump sum into a 401K with decent investment options is all you need to do.

Cash it out and pay 20% taxes on it. Put it in savings, or otherwise invest it with minimal exposure. Sounds like a no brainer to me, but I'm ignorant in retirement financial matter. ...

Don't take the money and pay taxes.  A) The tax dollars you pay are not ever again going to earn money for you and B) having $$ available in a non-retirement account is pretty tempting when you want a fancy new cooker.  Then they will be gone forever and not available when you need them in retirement.  If you're not worried about money in retirement, try a cat food sandwich and see how you like it.  Or maybe a bowl of dry dog food with water.

There is a book for novices "The Coffee House Investor" that I have been recommending recently.  There are others but this one is pretty good.  I have met the author and he is a sharp guy.

If you think you will have a high tax rate when you retire, see if you can put the money in a Roth 401k so you don't pay taxes when you withdrawal it.  I agree with the target date fund that is close to your retirement age.  Most of those funds average 6%-10% return annually on average and have very low fees.

How old are you friend bobitis?  I won't disagree with aridale's advice.  Yet as good as it is it's loaded with assumptions.  If you're a certain age, and have an inkling that we're at an all time high in equities then you'd take a serious look at an annuity.  Yes you'll be getting just 5% or less on your money, but it's 100% guaranteed for life.  Add that to your social security and dog food won't be in your future.

DK

I'm still young enough to follow aridales advice, but in my 25 years of investing, the dang market is a lot like Vegas regardless of long term trends.  At a certain age take your guaranteed money and run.

Somehow, I lost 30% of my savings after 9/11 and this has me quite nervous.
I'm ignorant in retirement financial matter.

Pelletfans, we're making this worse for bobitis.  He's confessed ignorance and nervousness.  There is absolutely nothing wrong with that, but it tells us he's risk averse.   Take the future annuity at 62 years of age.   Consider it a nice little bump on your social security.  The more income streams you have for retirement the better, you'll now have two. 

DK

Good advice thus far. I would add that it also depends on how much you are relying on this income in retirement. Since you mentioned 35% tax bracket, and said the pension was meager, I suspect that it won't be a major source of income. If that's the case, I'd put it into your 401K as you'll have more flexibility and can pass along to your heirs, and market swings won't really bother you. If on the other hand you are relying heavily on it, then an annuity might not be a bad idea as it will guarantee you a fixed income stream and you won't need to worry about market fluctuations. Some annuities do allow your heirs to get a portion if you die within a certain number of years.

1st... I didn't sell anything. There was no involvement on my part.  Maybe I'm confusing 401K vs retirement plan?
Have I been doing this all wrong for 20+ years?

My concern is rolling it over into a 401K, and the government taking MORE than the current 20%. I don't trust the government when it comes to my money. The ONLY reason they're involved is to take more than I receive. It's a Ponzi scheme. I have absolutely no hope of ever getting one thin dime from Social Security. It was given away a long time ago to many that have NO connection in the matter.

Thanks for the tip on the book.

FYI, my retirement is still far below what it was  when 9/11 occurred. Forgive me for being skeptical, but all that 'Poof' has never returned.

Rich folks getting richer by stoopidifying the masses.  Legalized theft in my opinion.
 

1st... I didn't sell anything. There was no involvement on my part.  Maybe I'm confusing 401K vs retirement plan?
Have I been doing this all wrong for 20+ years?

My concern is rolling it over into a 401K, and the government taking MORE than the current 20%. I don't trust the government when it comes to my money. The ONLY reason they're involved is to take more than I receive. It's a Ponzi scheme. I have absolutely no hope of ever getting one thin dime from Social Security. It was given away a long time ago to many that have NO connection in the matter.

Thanks for the tip on the book.

FYI, my retirement is still far below what it was  when 9/11 occurred. Forgive me for being skeptical, but all that 'Poof' has never returned.

Rich folks getting richer by stoopidifying the masses.  Legalized theft in my opinion.

Bob, you really need to get someone to look at your retirement accounts and give you some advice. If you really have less now than you had 9/11, there's a big problem. And the problem is not the government - they haven't touched anything in your 401K. Something is not right here.

1st... I didn't sell anything. There was no involvement on my part.  Maybe I'm confusing 401K vs retirement plan?
Have I been doing this all wrong for 20+ years?

My concern is rolling it over into a 401K, and the government taking MORE than the current 20%. I don't trust the government when it comes to my money. The ONLY reason they're involved is to take more than I receive. It's a Ponzi scheme. I have absolutely no hope of ever getting one thin dime from Social Security. It was given away a long time ago to many that have NO connection in the matter.

Thanks for the tip on the book.

FYI, my retirement is still far below what it was  when 9/11 occurred. Forgive me for being skeptical, but all that 'Poof' has never returned.

Rich folks getting richer by stoopidifying the masses.  Legalized theft in my opinion.

Bob, you really need to get someone to look at your retirement accounts and give you some advice. If you really have less now than you had 9/11, there's a big problem. And the problem is not the government - they haven't touched anything in your 401K. Something is not right here.

agreed unless a lot of the money was in company stock that tanked and didnt recover

I suggest you roll it over and call Vanguard and have a chat with someone.

Bobitis you need to sit down with a professional and have them review everything and lay out a plan for you.  I have used Ameriprise since I retired and they have done a fantastic job for me.

Bobitis you need to sit down with a professional and have them review everything and lay out a plan for you.  I have used Ameriprise since I retired and they have done a fantastic job for me.

This is good advice. If you don't want to consult Ameriprise, most banks have investment depts that could be of assistance in helping you develop a plan that works for you.  Go to the bank you bank with. There are too many working parts and unknowns right now for any of us to intelligently advise you.  But yes, most true pension plans are very different than a 401(k).  Most pension plans rely on the stock of the company for value.  Most 401(k) plans have a variety of investing options available including very low paying but very safe CDs and government bonds.  Seek professional help.

Sadly, I don't have time for all of your gracious replies. I need to submit my choice nlt 10/13.

I truly appreciate the feedback.

Sadly, I don't have time for all of your gracious replies. I need to submit my choice nlt 10/13.

I truly appreciate the feedback.

Then roll it into a 401k.  If you decide you want to do something different later, then you will have the same penalties if you did it now.  I would suggest using a dated fund in the 401k plan.  Surely, there should be someone within the HR office to provide some guidance or point you to the people that advise their 401k plan to provide you with assistance very quickly and free.