[USER]

Anyone know if there’s an obvious right choice here? New to FIRE. In mid 30s. My spouse received a letter after separating from employment that there is a limited window to request a lump sum of their pension ($7.5k worth).

The options are to:
– receive a lump sum payment which seems to involve an additional 10% tax

– wait until they turn 65 to collect while it grows with interest (30+ years away)

– obtain an annuity (I don’t really understand how that would work)

– roll it over

It seems like rolling it over is the best option, or taking out the lump sum.

Hoping to learn from you guys.

[Franc]

The answer to this question is dependent on whether she will enter the same line of work next or later.

If she works for a federal agency for example and will later work for another federal agency there is a chance that retirement can be credited towards her retirement *eligibility* (when she can retire with full benefits, how much pension, the rules under which she entered the retirement plan, etc).

For example, for teachers in many states the year you enter/start employment determines what retirement plan you are on.

So, if you roll over or cash out your retirement outside of another pension you loose the pension but also the rules of that pension at the time you entered.

Need more info on what type of pension (federal, state, union, etc) and whether she’s going to reenter similar work later that has a pension option

[Darrell]

For me this would be easy. Roll it over. Roll it to someplace that you can control it and add to it. I would probably choose vanguard or if Fidelity.

[Sue]

Yes, you can do a rollover or just initiate a Trustee to Trustee transfer. Instead of them sending you the check, reach out to the next retirement investment to do it.

If you forget to roll it over within that window, you can get penalized with early withdrawal before retirement age plus tax penalties.

[Author]

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