I was recently notified that a past employer will be changing the way their pension plan is funded. In this notification I found out that I have approximately $9500 in this account that I never knew I had. I was fresh out of college and didn't begin contributing to any sort of retirement until my next job 4 years later. They are giving me the option of deferring it until 55 (2035) with the only contribution being 4% annual interest. Which would be a lump sum of $16K before taxes are taken out. Or taking the lump sum now as a cash payment or roll it over to an IRA. I'm thinking of cashing it out in a lump sum and fixing a few deferred maintenance items on my home when I normally would just roll it into my current retirement plan.

Thoughts?

Unless you want to pay taxes on a raise plus a 10% penalty you need to roll it. Buy some Google or Apple and let it sit.

Another GOOG, AAPL buyer. Good, glad I'm not only one.

It certainly depends on how much you have saved outside of this and what your goal is for retirement. Is your class year at A&M '85? Or is that your birth year?

If it is your birth year and you retire at 65, $16k at 8% ROR per year is $138,000.

Or you could take the $16k, pay your 20% ordinary income tax and 10% penalty, net the $11,000 or so dollars and "update" things in the house that you almost certainly won't be in forever.

Your choice!

You should ask about the lump sum valuation. With the increase in interest rates this year, most pension plans (lump some payment only) will decrease in value by as much as 20%, so if you don't pull it about before 12/31/2022 you are facing a significant decrease in the value of your lump some payment. The 10% tax penalty for pulling it out early.....should also be considered when making your final decision.

I was in the same scenario as you about 15 years ago, for roughly the same amount of $$$. I opted to roll it over into my IRA. I'd forgotten about the money so it was very easy to move it to something that was mine that I couldn't touch till retirement.

Like some of the others have said, I would strongly recommend AAPL. I've had that stock in my IRA for the past 15 years and it's been a great ride. Good luck!

I'd make sure it was truly an IRA and completely outside of your previous employer. If so, move accounts and save on taxes. Any other scenario and I'd get my money today.

Whenever a company monkeys around with pension fund, something is amiss. Sooner or later, they'll screw you and you won't get any of your pension.