Why Would Anyone Sell Pension Plans For A Lump Sum?

by Jimmy
(USA)

Retired

Retired

Why should anyone want to sell their pension plan? Well, I can understand worries about security of the pension future, companies stopping their pension payouts or disappearing along with your pension savings (there may be protections against this), but otherwise what's the advantage of selling pension?

I believe many variables really have to be taken into account when one is about to do the move to sell their pension for a lump sum.

First off, you pay a heavy price for the sale. Not only are you loosing the security of a steady annuity income, but you also will NOT get the same amount that you would from future pension pay outs. Your boss is not going to buy out your pension for the same price that they would otherwise pay you in the future payouts. They'll discount it at a given rate and give you the Present value.

Then, consider the possibility of losing the pension benefits, as well as possible tax implications. Is the income of a pension cash out considered taxable income? If so, count this in into the total of what you get from your employer who wants to buy out your pension.

Even if your plan is to take the money of the pension buy out and invest it in a plan, say annuities with some benefits not included with your pension, you should think hard if your future annuity gains will balance out what you lose by selling your pension for a lump sum including the income taxes if applicable for the pension sale.

You better think this through carefully before you act for selling your pension will be a one time and irreversible act. You can't reverse it afterwards. So think hard, make sure it pays for you.

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Jul 27, 2014
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Is Selling Your Pension Legal? Sell Only If Legitimate To Do So
by: Anonymous

Yeps, before you even think of selling your employer-funded pension make sure that it is legal to do so.

Factoring companies are soliciting pension keepers, including government and military retirees. Governments are looking into it and investigating companies attempting to do illegal things.

When you sell any retirement policy for cash, always, always question and research the company or broker willing to buy the policy. Work only with legit, accredited sources, make sure all is legal and straight-forward. Oh, and ask tough questions about fees, commissions, charges, risks, benefits, parties involved. Don't leave a stone unturned. The bottom line is what concerns you, the net total. Is it in your interest? Do you get something worthwhile?

Do what's legal and what's right, ethical and beneficial to you, and you'll be well. Luck to all!

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