IMQ Application # 28: Get Pension Lump Sum Now before Interest Rates Rise

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  • Post last modified:September 1, 2023


For your clients with pensions, have you recommended some forgo the monthly annuity benefits for a lump sum that can be rolled over into a diversified portfolio?

For example:

George has been with his company 21 years and has a pension with a lump sum value of $600,000. Low interest rates increase the lump sum value of a participant’s pension. Depending on what discount factor his company uses in setting the lump sum value of his pension, he may work another 4 years, but the pension may only slightly rise in lump sum value because the U.S. Federal Agencies has just announced a future rise in interest rates.

As long as George has passed his company’s age limit for early retirement (usually age 55), an In Marriage QDRO allows him to get a lump sum valuation based on current interest rates and roll up to 100% of that lump sum value to an IRA in his wife’s name, while still collecting another few years of pension credits during his remaining employment.