When to start drawing pension
Should I Take My Pension In Payments Or As Lump Sum?
Laurie is going to start us off this
hour and Laurie's an Idaho hey Laurie
welcome to the Dave Ramsey show thank
you my question for you is whether it is
a good idea to take a lump sum for your
pension payments or take the payments or
take that lump sum and roll it into a
self-directed real estate IRA we just
learned recently about that from our CPA
so we're just not sure what would be the
best route to go my husband 62 turned 62
yesterday wanted to retire yesterday and
but we're not quite there we don't think
that he were totally debt-free yeah in
general terms I always take the lump sum
and roll it to an IRA okay here's why
pensions are highly regulated and they
make they have they have to invest in
such a way that they make a substandard
rate of return and so a typical pension
is going to make 6 to 7% in a 10 to a
12% world okay so they don't do very
well so if you just took the money and
invested it in good mutual funds you
would make more money than the pension
would pay you okay okay that's thing one
thing too is when you die the pension
dies with you right okay and so but if
you roll it to an IRA it's now an asset
of yours it's an estate and so what's
the lump sum pension that they're
offering you one hundred and forty seven
thousand okay so your your heirs are
gonna get one hundred and forty seven
thousand or your heirs are going to get
zero yeah that's amazing
yeah that's fairly easy math for me I
can do that one okay so that's why I
roll it now then I would either roll it
I typically say just roll it to mutual
funds and a you know a typical IRA a
traditional IRA
there's no taxes on it it's it's there
grows it's going to do well you have an
interest in real estate and your CPA
introduced you to a self-directed IRA
for a piece of real estate if you bought
a hundred and forty thousand dollar
rental house inside of this IRA
with a self-directed IRA you can do that
the only problem is is that it is it's a
bit cumbersome because you now are
operating a rental property inside an
IRA and so when you when you like need
to fix it when it makes a profit the
profits trapped in there until you pull
it out and pay taxes on it okay and it's
and you've got to do all of your
operational decisions you want to buy
heating air unit it has to be bought
with money in the IRA it can't be bought
with your money outside the IRA so you
have to treat it like it's a standalone
separate business and there's no
embezzlement allowed you follow me right
and so it's a pretty stinkin cumbersome
I'm not a big fan of it unless you are
just really awesome people with real
estate you'd love real estate you're
very good at it this is this would be
your 10th property you've already got a
bunch of other properties but if this is
your very very first rental property I
would never do that inside a
self-directed IRA okay I think I want
you to learn real estate outside of that
yes Mike my dad was a real estate broker
so I've written raised in the business
my son-in-law is a very successful you
know business a real estate property
management owner but we have not been
and we've kind of regretted not getting
involved in it sooner you know where
we're at the market housing market is
really high so that's another thing
against us it's a bad time to buy
because it's so high no what I would
propose then let's roll it to an IRA and
some mutual funds and let it sit there
and he's only your guys he's only 62 you
guys are still young you might look up
and that hundred and fifty turns into
300 by the time you're 70 and maybe that
market cools off and maybe then you want
to buy some real estate all right so
then if we did that then can you take
money out of that IRA then and do it
roll that over to a person yeah you can
you can roll a traditional IRA of oh
four oh one K anything into a
self-directed IRA oh okay at any time so
my point is you don't have to
make the decision today right okay but I
would make the decision on the lump sum
distribution and up and rolling it to
your IRA because it's a hundred forty
seven thousand dollars more to your
heirs that's simple hey thanks for the
call
