要不要买断公司退休金？(2023/4/2 更新）

A friend of mine was asking me about pension fund distribution.  His company is offering one-time buyout of $300k lump sum or he can take monthly payment of $1,500.  The question is whether he should take the lump sum or monthly payment?

There are some questions that can help decide whether to take the annuity or the lump sum.

	Questions	Monthly Payment	Lump Sum
	Do you need this money for your monthly expenses?	Yes	No
	Do you want to pass the money to your children?	No	Yes
	Is the annuity inflation adjusted?	Yes	No
	What is your net worth?	$3M	$250K
	How is your company's business prospect?	Good	Not sure
	Does the pension have the medical plan	Yes	No

By using this $300K lump sum and $1,500 monthly pension payment as an example, let’s take a look at this.  The $1,500 monthly payment represents 6% of return from $300K.

This friend of mine does not need $1,500 monthly payment for his living expenses. – Lump Sum

(The money can be invested in the market by himself)

He has a child whom he wants to pass the money to.  – Lump Sum  (If a person chooses the pension plan survivor benefit, the monthly payment will be significantly reduced based on the percentage of payment that the survivor gets.  Taking the lump sum is a better way to pass down the money.)

His monthly payment is not inflation adjusted. – Lump Sum  (6% return will not increase since it is not inflation adjusted)

His net worth is about $3M. – Monthly Payment  ($300K represents only 10% addition to the net worth of $3M, not significant enough)

His company business prospect is good. – Monthly Payment  (Chances for the company going into bankruptcy are low and his pension will be there)

His company pension does not carry a medical plan for retirees – Lump Sum (if there is a medical plan in the pension starting at 62 year old, you should seriously consider to take the monthly payment.)

In this example, the decision should be taking the lump sum.  In the end, this friend of mine has decided to take the lump sum of $300K.

After deciding to take the lump sum, you can roll the money to a Rollover IRA account with Fidelity or Schwab and manage the money yourself.  Since the rollover is not a taxable event, you have no tax liability until you take the money out.

[hhtt]

回复 'jeff.goodman' 的评论 : Taking the lump sum means that you will roll the money to a self-directed IRA, no tax consequence, it does not mean that you take the money and deposit it to your bank account.

[jeff.goodman]

If taking in lump sum, would that incur huge income tax for the year?

[hhtt]

回复 'feifei001' 的评论 : 谢谢来访。如果是有医疗保险在里面，那是一定拿年金了，除非Lump Sum 很大。

[feifei001]

我们这里如果一次性lump 就没有 meidcal care benifit 了， 只好 monthly 拿。

[hhtt]

回复 'houmom' 的评论 : 谢谢你的来访。这退休金占总资产的比例，是一个比较灵活的指标。300K/3M和300K/1M相比。后者如果加在一起，总资产就增加了30%，那是一定拿Lump Sum。300K/3M 就没有这么硬性指标，根据每个人的情况和Preference。

[houmom]

很有道理。唯一不太同意是3M那一条，虽然300k not significant跟3M相比，但这不是take monthly payment的理由吧。还是主要比较两种方法，最后那个total更多。