Investors....come in please!

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Originally Posted By: Cogito
OK, this is not about the stock market, but rather a different facet of investing. I've got a vested pension from some time I spent at ATT, which I will be elgible to start collecting in Oct this year. I have the option of getting either $593.08/mo for the rest of my life, or taking a lump sum settlement of $88K. Which means I would need to live at least a little over 12 years to get that much paid back. Right now I'm just living off Soc Sec retirement benefits so finances are tight, but I get by unless there is an emergency, etc. I'm wondering the best way to go with this decision. If I take the payout, won't I be liable for some hefty taxes on it? I dunno how much, I am pretty naive about finances. Can you guys point me the right direction here? I need to let ATT know this month month, if I am taking the payout.


How old are you, how's your health & how long do/did your parents live?

Have other 401k/IRA/Roth's coming up not touched yet?
 
As with anything dealing with the IRS, the tax treatment of lump sum retirement distributions is enough to make you want to scream.

http://www.kiplinger.com/magazine/archives/pensions-take-a-lump-sum-or-not.html

http://www.irs.gov/taxtopics/tc412.html

I'd tend to agree with Pablo; they're giving you an 8% return. Sure, that can be beat in the market with prudent and aggressive money management, but just take a look at returns of most balanced portfolios that investment companies offer, and you're not going to find 8%! And most companies would want you in a much safer allocation of bonds and fixed income products. Everyone knows what yields are today. LOW.
 
Originally Posted By: tpitcher
How old are you, how's your health & how long do/did your parents live?

Have other 401k/IRA/Roth's coming up not touched yet?


I'll be 65 in Oct, health is so-so, just got a neuropathy attack last month, and can hardly walk, doing rehab to get mobility back. Parents lived into late 70's. Have no other IRA's, etc., coming up, so this is it. Lump sum or the monthly payments. If I take the payments and end up getting wiped out by some awful medical situation or in a nursing home, etc., I wouldn't be able to use the $593 cause it would go to pay for med bills, right? What would the tax hit on 88K be like?
 
The tax hit will be just like earning 88K; it'll be taxed as income according to the current income tax brackets. And they are required to withhold 20% as a tax payment.

What you could do is roll the lump sum over into an IRA and withdraw funds when you need them and probably reduce the overall tax burden.

You're eligible for Medicare as far as medical.

This might be something you'd want to run by a professional, not knowing all the details of your particular situation.
 
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I'm with Drew.

Likely if you have no other income and not a ton of deductions, the 20% should cover you on taxes.

You have Medicare. But this is your only cash? OTOH I would think you need the income.

All said and done, 8% still looks best.
 
The stupid thing is, the IRS just this year I believe, allowed companies to use a higher interest rate (at at time of record low interest rates) to calculate the present value for pension annuities. It essentially makes the present value or the lump sum, smaller. So 8% may "seem" like you're doing alright, but it means your lump some is smaller then what it might have been a few years ago. They're doing this and hoping more and more people take the lump sum as it greatly helps companies with burdensome pension obligations.
 
Originally Posted By: Drew99GT
Originally Posted By: Pablo
And my biggest losers are gold and metals.


http://www.reuters.com/article/2012/08/07/us-usa-fed-rosengren-idUSBRE8760NR20120807

This slowdown in metals I thought was a topping process since late last year, but I think it might be somewhat of a flag or pennant to the larger bull market. If the Fed came out and said they're going to do QE into perpetuity, gold and silver and miners might do another parabolic upswing (even though it probably doesn't mean an end to the treasury bull market or some dollar collapse scenario). That will also be very bullish for stocks and other risk assets. I'm sitting tight ready to jump in if/when it happens, especially for precious metals.


Looks like a breakout on the upside in Gold will happen soon.
 
Of course, my smallest $ holding rises the most... PSX, a spin-off of COP, is up 24% since the split.

Dividends today/tomorrow: Quarterly of LINE (7.5%), ETP (8.2%) & PG (3.4%)
smile.gif
 
Originally Posted By: tpitcher

Let's talk REIT's.

NYMT, O or something else...??



Either they are beat up or about to be beat up. O has been good in the past, but WRE has been beat down so bad, I think it's the bargain in the group. YMMV.
 
Thanks.

I really don't know what to do (prepare for). Bonds are/will start losing value, "the market" is frothy, homebuilders had a run, REIT's are hard to say... it's just a weird time.

Now, being August, things are quiet... essentially the calm before the storm in Sept/Oct.... so I'm almost inclined to sell some of my profit stocks & funds, then buy back at lower prices. BUT, then I increase the taxes owed big time. Ugh.
frown.gif
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I've been in AGNC since last December (REIT). Fantastic dividend and excellent stock price performance as well. It won't last forever, but it's still giving a good ride.
 
Originally Posted By: tpitcher
Thanks.

I really don't know what to do (prepare for). Bonds are/will start losing value, "the market" is frothy, homebuilders had a run, REIT's are hard to say... it's just a weird time.

Now, being August, things are quiet... essentially the calm before the storm in Sept/Oct.... so I'm almost inclined to sell some of my profit stocks & funds, then buy back at lower prices. BUT, then I increase the taxes owed big time. Ugh.
frown.gif
confused.gif





I'm still not sold we're going to have another huge sell off like the last 3 years. We've essentially already had this years sell off. We may have another couple percent drop, but it will be in the confines of the uptrend that is clearly established. Cyclical rotation into risk and out of defensive areas has been underway for several weeks now. The one MAJOR problem though is volume. It's dried up like midwest corn.

Another thing that will KILL the market is if all the chatter about an Iran strike before November, comes to fruition. Oil is taking off again in an environment of slow economic growth and little if any organic reflation, which means it's mostly speculative about middle east tensions IMO.
 
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Hummm... Been thinking the same thing.

May pull the trigger & sell, but which as they're all good ones?

Up 25% on PSX
Up 9.2% on CAT
Up 6% on COP
Up 5% on PG
 
Originally Posted By: Pablo
Originally Posted By: tpitcher

Let's talk REIT's.

NYMT, O or something else...??



Either they are beat up or about to be beat up. O has been good in the past, but WRE has been beat down so bad, I think it's the bargain in the group. YMMV.


Now PF is saying sell WRE (it's been up a little), and issued a buy on EXC, which was up a penny today.
 
Originally Posted By: Cogito
OK, this is not about the stock market, but rather a different facet of investing. I've got a vested pension from some time I spent at ATT, which I will be elgible to start collecting in Oct this year. I have the option of getting either $593.08/mo for the rest of my life, or taking a lump sum settlement of $88K. Which means I would need to live at least a little over 12 years to get that much paid back. Right now I'm just living off Soc Sec retirement benefits so finances are tight, but I get by unless there is an emergency, etc. I'm wondering the best way to go with this decision. If I take the payout, won't I be liable for some hefty taxes on it? I dunno how much, I am pretty naive about finances. Can you guys point me the right direction here? I need to let ATT know this month month, if I am taking the payout.

OK, I thinking about taking the 88K payout and putting it into an IRA to avoid the tax hit. What is my best option for setting this up without excessive fees being charged to me?
 
Originally Posted By: Cogito
Originally Posted By: Cogito
OK, this is not about the stock market, but rather a different facet of investing. I've got a vested pension from some time I spent at ATT, which I will be elgible to start collecting in Oct this year. I have the option of getting either $593.08/mo for the rest of my life, or taking a lump sum settlement of $88K. Which means I would need to live at least a little over 12 years to get that much paid back. Right now I'm just living off Soc Sec retirement benefits so finances are tight, but I get by unless there is an emergency, etc. I'm wondering the best way to go with this decision. If I take the payout, won't I be liable for some hefty taxes on it? I dunno how much, I am pretty naive about finances. Can you guys point me the right direction here? I need to let ATT know this month month, if I am taking the payout.

OK, I thinking about taking the 88K payout and putting it into an IRA to avoid the tax hit. What is my best option for setting this up without excessive fees being charged to me?


Do you have any other retirement accounts through a brokerage or any existing IRAs? If not, you'll have to open an account and then get the Pension steward to roll the lump some directly over into the IRA. They should know how to do this. At that point, you'll need to select what investment products the money goes in. Fidelity is great for doing things like this as they have excellent customer service.

I'm not a registered rep or anything, and I'm not giving advice, but you really might consider talking with a professional about your situation, your health etc. to see what the correct decision is. You're probably not going to get a yearly return on the lump some as big as the pension annuity, but you could draw down the principal at the same time, but it all rests on how long you live.

Hope that helps.
 
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