MaryHu
9-27-12, 10:56pm
We’re early retirees. I’m the CFO of our household. My husband retired in 1997 at 44 and I retired in 1999 at 41. We managed this by following the principles set forth in “Your Money or Your Life”. I still work part time mostly just to keep busy. We’ll have about $40k income this year of which we’ve reinvested almost 12 k into My Roth IRA and our other investments. We give a disproportionate (according to the IRS) 12 to 13% per year to charity. We’re very frugal.
We’ve been taking money out of his Traditional IRA for the last 8 years without penalty under the annuity exclusion. Some years we need the money (reroofed last year) most years we don’t and we just reinvest into my Roth IRA or into our regular investment account. (I think of it a slow Roth IRA conversion so we don’t get hit with all the taxes at once) We’re extremely conservative investors who don’t take our money to Vegas or its extension: Wall Street. (How can you beat inflation if you lose your capital?) Our money is all in 30 year Treasuries (some purchased in the 90’s still paying 7.25% with 15 more years to go) Freddie Macs, Ginnie Mae’s and some corporate bonds with very high ratings. This provides us with a good steady flow of interest income and lets us sleep at night.
My husband worked for JC Penney for over 20 years in a mid level management position. He received a packet recently offering to let him take a lump sum versus paying out his retirement over the rest of his life. I guess they’re sending this now because he’ll soon reach 59 ½. I’m having a hard time deciding which option to choose. I’ve explained to him that it would make my decision so much easier if he’d just tell me how much longer he’s going to live but he’s stubborn. Both his parents died in their early 80’s.
JC Penney hasn’t been doing so well in recent years and I’m inclined to take the money and run while we still can. I’ve read some articles about what happens to pensions when companies go belly up and how stressed the PBGC (Pension Benefit Guaranty Corporation) is becoming. I can only imagine that’s going to get worse in coming years. I’m leaning towards taking the money and managing it myself even if it means we may get a bit less (because this is such an awful time to invest) in the long run versus taking the pension. Because we may wind up getting lots less in the event of the company going bust. Or both of us dying in a car accident next week. One in the hand is worth 2 in the bush and all that. Also we do have a son we’d like to leave something to when we die.
What’s your take on this?
PS: These aren’t big amounts we’re talking about due to his retiring early. We’ve never really counted on this money, probably won’t really need it and just thought it would be nice when it started showing up. We’re talking $300 a month (with half that to the remaining spouse in the (probable) event he dies first) versus a 54k lump sum. If we took the lump sum I’d roll it into a Traditional IRA to avoid the tax hit and just invest it and leave it alone until we need it or we’re required to start taking distributions 11 years from now. Or we could take it in little bites like we’ve been doing with his existing Traditional IRA and putting it into a Roth IRA so the income would be tax free. Hmmm... What to do?
We’ve been taking money out of his Traditional IRA for the last 8 years without penalty under the annuity exclusion. Some years we need the money (reroofed last year) most years we don’t and we just reinvest into my Roth IRA or into our regular investment account. (I think of it a slow Roth IRA conversion so we don’t get hit with all the taxes at once) We’re extremely conservative investors who don’t take our money to Vegas or its extension: Wall Street. (How can you beat inflation if you lose your capital?) Our money is all in 30 year Treasuries (some purchased in the 90’s still paying 7.25% with 15 more years to go) Freddie Macs, Ginnie Mae’s and some corporate bonds with very high ratings. This provides us with a good steady flow of interest income and lets us sleep at night.
My husband worked for JC Penney for over 20 years in a mid level management position. He received a packet recently offering to let him take a lump sum versus paying out his retirement over the rest of his life. I guess they’re sending this now because he’ll soon reach 59 ½. I’m having a hard time deciding which option to choose. I’ve explained to him that it would make my decision so much easier if he’d just tell me how much longer he’s going to live but he’s stubborn. Both his parents died in their early 80’s.
JC Penney hasn’t been doing so well in recent years and I’m inclined to take the money and run while we still can. I’ve read some articles about what happens to pensions when companies go belly up and how stressed the PBGC (Pension Benefit Guaranty Corporation) is becoming. I can only imagine that’s going to get worse in coming years. I’m leaning towards taking the money and managing it myself even if it means we may get a bit less (because this is such an awful time to invest) in the long run versus taking the pension. Because we may wind up getting lots less in the event of the company going bust. Or both of us dying in a car accident next week. One in the hand is worth 2 in the bush and all that. Also we do have a son we’d like to leave something to when we die.
What’s your take on this?
PS: These aren’t big amounts we’re talking about due to his retiring early. We’ve never really counted on this money, probably won’t really need it and just thought it would be nice when it started showing up. We’re talking $300 a month (with half that to the remaining spouse in the (probable) event he dies first) versus a 54k lump sum. If we took the lump sum I’d roll it into a Traditional IRA to avoid the tax hit and just invest it and leave it alone until we need it or we’re required to start taking distributions 11 years from now. Or we could take it in little bites like we’ve been doing with his existing Traditional IRA and putting it into a Roth IRA so the income would be tax free. Hmmm... What to do?