Financial gurus here?

pishta said

have an offer to cash out an old pension plan from a long past job, they wanna give me $22k lump sum or give me $120 a month after I retire. I honestly don't know how long Ill live past 68 but 22k pre-tax is about 15 years worth of those payments. Of course They'll take a chunk out of that lump sum for taxes but It could pay off interest bearing loans....any advice? I'm kinda leaning on paying off some debt with it...I am a home owner so I'm not going to be paying rent when I retire...knock on wood!

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Well, let’s do the math.

If they pay you the monthly payment it comes to $1440 per year that will be taxed.

If you take the lump sum at your current age of 51 and roll it into an IRA (no taxes) earning just 5% per year, your $22k will become $44k by the time you reach age 65. (Most IRAs do better than that)

If you only take the 5% you earn on it every year after age 65, you will get $2200 per year that will be taxed and never even touch the principal $44k in the account.

Don’t let them keep your money to make more off of it in interest than they are going to pay you every month.