Keep defined benefit pension or roll over to an IRA?
Deciding whether to keep a pension or roll it over forces a choice between the guaranteed security of a fixed annual return and the potential for higher market gains. This uncertainty leaves people torn on whether to lock in a predictable payout or move the funds into an IRA from a previous employer.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Consulting a financial advisor to run projections based on expected market return rates
- 2Analyzing historical plan growth rates and survivor benefit cost reductions
- 3Leaving the funds in the old employer's retirement account to keep a guaranteed fixed return
- 4Rolling the funds over into a personal Rollover IRA to invest in index funds like the S&P 500
- 5leaving funds in the old employer's 401k plan to mitigate fees or maintain asset protection
- 6Leaving the pension funds with the previous agency until retirement age
- 7Rolling over the balance into an IRA or a qualified account with a new employer
- 8Taking out a loan against the pension or a new qualified account rather than a direct cash withdrawal
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“I used to work for a county agency and have a pension with them that is not transferable. I contributed about $70,000 which I can cash out but pay the taxes on it or leave it with them until i reach retirement age. I would like to use the cash out to make a down payments on a home. Any advice is welcome.”source ↗
“I am torn on the security of one versus the potential double digit gains of the other choice. Anyone ever dealt with this in the past or advised on a situation like this?”source ↗
“Keep defined benefit pension or roll over to an IRA.”source ↗
“I’m 29F trying to decide what to do with an old retirement account from a previous employer that is a state retirement account.”source ↗
“The question is that should I do a personal Rollover IRA, or leave it alone to lock in a guaranteed 6% fixed annual return.”source ↗
“I did not know pensions had withdrawal penalties.”source ↗
“In our handbook all it says is that there is a 20% mandatory tax they have to take plus an optional state tax of 2% (California) nothing regarding penalties. But I’ll look in to it.”source ↗
“I am still waiting for the final paperwork to see what it is. After 5 years you are considered vested which I am and have their contribution as well at retirement.”source ↗
“Wife's company folded and we are forced to rollover Company A 401k to an IRA. Now that there is a traditional IRA balance, any reason not to also rollover her previous Company B 401k to IRA?”source ↗
Where this came up
People with this problem also raised
- 9Is giving up a secure pension job worth it?
- 3Should I lower my retirement contributions to save for a house?
- 3When is the best time to do a retirement account rollover?
- 6Should I do a Roth conversion or stick to traditional 401k?
- 24Should I pay off debt or start investing and saving?
- 11What funds and allocations should I pick for a new Roth IRA?