401K vs Pension

[GreeneHunter]

Not sure if this is allowed but here goes !    Where I retired , from 8-10 years ago an individual was allowed to either take a Pension or Lump Sum in your 401K !  I know quite a few people whom took the Lump Sum and spend everyday staring at Wall Street . I myself took a Pension . There is the thought that you cannot will the Pension to anyone but leave Survivor Benefits to a Spouse . My Spouse also retired from the same place and we both left no Survivor Benefits to each other but went out and bought a 100K Life insurance for each other . We know former co-workers whom took the Lump Sum and panicked every time the Market takes a dive (like right now !) but our Pensions remain the same !  Thoughts ?

Edited December 26, 2022 by GreeneHunter

[ZAG]

2 minutes ago, GreeneHunter said:

Not sure if this is allowed but here goes !    Where I retired , from 8-10 years ago an individual was allowed to either take a Pension or Lump Sum in your 401K !  I know quite a few people whom took the Lump Sum and spend everyday staring at Wall Street . I myself took a Pension . There is the thought that you cannot will the Pension to anyone but leave Survivor Benefits to a Spouse . My Spouse also retired from the same place and we both left no Survivor Benefits to each other but went out and bought a 100K Life insurance for each other . We know former co-workers whom took the Lump Sum and panicked every time the Market takes a dive (like right now !) but our Pensions remain the same !  Thoughts ?

Pension max can be a great alternative like you both did. 
Some pension plans are better than others and pensions are not guaranteed.
Take the teamsters pension plan. Around 4yrs ago retirees received a letter saying the pension plan was in critical status and in order to keep it afloat pensions were being reduced somewhere around 30% to 40% (not good). That’s a big hit on a fixed income with rising inflation. 
Govt bill just bailed the pension out and original benefits were just restored but again its no guarantee just like the market.

Most cases a rollover to an IRA makes the most sense. 

[Bucksnbows]

This is the Lounge and the right place for this. Financially speaking, you always take the lump sum and invest it. That way if one of you dies, the other one gets to keep it unlike a pension. The stock market remains your best investment opportunity even when it tanks for a brief time like it is currently. 

[Moog5050]

Pensions are becoming a thing of the past due to increasing lifespans except in government that just keeps spending. Which is better (lump sum vs pension) depends on a lot of variables including the terms of the plan.  Survivor benefits when married may make the pension more attractive.   But typically the lump sum is offered because from an actuarial perspective it saves the employer money.  That said a good investment strategy and managing risk may make the lump sum a better option especially if the recipient doesn’t live beyond the average person.   I am self employed so pension isn’t a consideration. But if it were, I would be running all the calculations.   If you have peace of mind, you made the right decision.    

[Nomad]

I have a pension , NYS police ,fire . It’s about the only thing NYS does well, not,to long ago it was funded at 108% . There are many opinions ,zero you get the most but it ends with your death . I took 75% pop up , I die my wife then gets 75% of what I was collecting , she predeceases me mine pops back up to full amount as that option costs like three grand a year .

We also have good outside investments , from land to stock, bonds , gold .

Anyone retired should not be using stocks for money to live on ! They’re a long time horizon investment, not for income producing , more or less. I have solid dividend producing stocks  , so I can draw my RMD off dividends when the time comes .

I could have taken “ The Plop “ and got 25% up front in cash , but I’d loose 17k a year in my annual pension, it may address some small legacy  concerns , but our kids are already sitting in butter .

It’s funny ,the guys I knew who took the plop, to invest and some how beat the institutional investors, all couldn’t generate any real  investment income before .

One of my favorite subjects , but I gotta shower and head out .

[DoubleDose]

All of the above is accurate.  I'd emphasis, the stock market is for long-term investing.  When retirement investing your 401K in the stock market it is still for long-term growth; that is early in your career.  Your 401k investments should be shifting out of the stock market and into less volatile investments near/at retirement.  This is the value of a certified financial planner (CFP).   A CFP looking at all your finances and assets can best determine for you , if you should take lump sum versus pension distribution, and which one. 

[Bucndoe]

It depends on the type of pension. Not all pension systems are the same. 

A pension and 401K are both retirement plans but they are not the same and are very different 

Edited December 26, 2022 by Bucndoe