I got ESP'd half way through 2016. I'm thinking of pulling my lump sum out and investing in some rental property with it. Has anyone pulled their lump sum out? I'm no where close to retirement, I'd just rather get that money working on investments for the next 20 years as opposed to sitting in Chevron's pension account. Anyone know the penalty's associated with doing so?
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-5lzo, Yes, I am in a similar situation, but our accounts, pensions and SS payments are significantly larger than that by an order of magnitude and I do not wish to brag or post any numbers on an anonymous site which could be declared BS in any event, as could yours, no one has any proof. On the other hand, The amount in our savings accounts and checking are immaterial for living a happy life, as I have learned being retired for the last few years. In fact, those who primarily focus on their financial situation, and I have met many, are invariably the LEAST happy, content, and fulfilled with their lives, instead they are generally wrought with anxiety, tension, and unsettledness. Try to live a real life. Life is very short, you don't have much time left at retirement age. If you are being consumed by the size of your savings accounts and material possessions you are not living at all, I can assure you.
I took the annuity and am happy I did. My 401k and IRA funds are invested in the market at minimal risk. My 100% joint & survivor annuity provides me and my wife a guaranteed monthly income of $4,389. I derive another $1,000 net per month in rental property cash income. Social Security kicks in next year with $3,167 a month. Having no debt or mortgage, that total income sustains us well with no immediate need to dip into our $1.75MM retirement accounts.
@2mpu , it's more common to "blow" your lump sum than to use it wisely, statistically, which is a big reason many advise to take the annuity. No big surprise.
I took a lump sum and spent it on yeyo. Flipping it like there's no tomorrow.
Sound advice, 1eab. Thanks.
With interest rates headed up, now is a good time to roll over the pension lump sum to an IRA. The lump sum will get smaller when calculated on the higher interest rates. I'd recommend against taking out the cash, because you'd have to pay a 10% penalty. If you want to have some of your retirement money invested in residential rental real estate, then have some of your IRA money invested in shares of a Real Estate Investment Trust that specializes in owning apartment buildings. This way you don't pay the 10% penalty, and still get the real estate investment you want.
I would leave it there or roll over to IRA tax free., IMO. Find another way to fund your rental investments, loan, etc. if possible. Do the math on the return of rental investments with plenty of advice and research online for the ROI. It can be good but comes at costs that most people do not consider. It is likely that the ROI including the withdrawal penalties that you would pay may not be worth it on paper. There is a reduction that all Landlords use on their ROI to account for future unknowns, like major repairs, maintenance, etc. You may not see them the first few years but the correct math figures them in on average. Also very few rentals are trouble-free with management, tenants, etc., yet some are, people always brag about them, I consider them the exception. There are just as many horror stories if not more.
Wake up, 1thf, you're having a nightmare. Drink a little hot cocoa and relax. It's only a dream.
Message to the OP, you're still young with only 8 years with Chevron. Stay positive and keep looking for a new job. Leave the pension intact and wait until later to pull it out.
take it asap and put it where you can control it, total collapse is in its beginning, rates will climb, and everything will disappear
Roll onto IRA then search 72T
Roll it to a individual IRA and you pay no penalty or income tax and there will be restrictions on how you can use it.
Remember interest rates are starting to rise which will reduce the payment.
Maybe a good time to rollout.
Thanks for your replies! I can justify the 10% (I had 8 years with Chevron), but the added tax liability may not be worth it. Appreciate the advice!
OP, it's clear from your post that you are no where close to retirement and must continue working. Yours is a situation that's not unique, my friend. If I can offer my honest advise, I'd ask you to leave your pension alone. You'll be taking a hard hit if you withdraw all of it now. Find a job and work until you are closer to a retirement age. If you were a short term Chevron employee and your lump sum is not that large, then maybe you can make the case for taking the 10% IRS penalty and tax hit and investing it in a good rental property. As long as your intent is to invest it well, you may come out alright after 10 years of rental earnings and property appreciation. Study the situation well. Good luck to you.
You will pay a 10% penalty plus it will be taxed as income, like if you make an early withdrawal from your IRA. Alternatively you could roll it in to an IRA to avoid the penalty.