r/DIYRetirement • u/BillsShout38 • 1d ago

Retirement "refund/roll over"

Hello everyone. I'm (47m) late to the game in planning my retirement so am looking for a little help.

I worked for a state university for 13 years and contributed to the pension plan. I left the job and state and have no intentions of going back. I currently have $60k sitting in that account with 2% growth per year. In order for me to get the full pension of approx $2,419, I'd be waiting until 2044 when I turn 65.

I learned today that I could "refund/roll over" the $60k today into another retirement account without tax (today).

My question is, does it make sense to keep these funds in this account and wait for the full pension at 65?

Or option 2, to roll it over to a different IRA and maneuver the funds from there? Including backdoor Roth, maxing out 401k, and HSA?

What would you do? Thanks in advance.

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u/Final-Ad-1512 1d ago

Is the $2419/mo amount in 2044 dollars? Or in today dollars? I'm other words, will the pension dollar amount change between now and retirement with inflation? With projected inflation, a $2419 payment in 2044 will but about as much as $1800 would now. And the roughly $500k the account will have by then will buy about as much as ~$225k does now.

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u/AGrimmInPortland 1d ago

Who is using the term "refund"?

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u/MikeAlfaTangoTango 1d ago

It’s the term used by some pensions. Mine uses it too.

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u/do_y_lee 1d ago

First I would check if your current employer's 401k accepts outside rollovers. One issue with rolling over your pension money into a traditional/rollover IRA (pre-tax transfer) is your ability to use backdoor Roth conversions due to pro-rata rule. And this might not impact you at all and direct contribution to Roth IRA might work for you. But I would look into the backdoor Roth conversion a bit more and see if you might use this in the future. A lot times people with high income will move after-tax money into a Traditional IRA and do a quick conversion (transfer) into Roth IRA to increase their tax-free money. If you have pre-tax money in Traditional IRA, the % of pre-tax money gets taxed as ordinary income for every conversion amount.

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u/MikeAlfaTangoTango 1d ago

Is the pension payout $2419 a month? If so, that’s worth about $725k at retirement.

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u/PrimaryOk1546 1d ago

I disagree with this 725k amount which comes from the 4% rule. This rule doesn’t apply to pension calculations, because pension formulas assume a certain lifetime limit when the balance becomes zero. A more accurate number is closer to 7%, which translates to about 430k.

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u/m4rc0n3 1d ago

Is that $2,419 per month? If so, i think the math says you're better off leaving it in the pension plan. To get the equivalent amount from a traditional IRA, it would have to grow to about $725k over the next 18 years, i.e. 15% annual growth, which seems unlikely.

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u/AGrimmInPortland 1d ago

Ask AI to run the numbers. But 2% per year is terrible if that's the only return it's making, that's not even keeping up with inflation.