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Letter Re: The Pension Gamble: Cash In or Stand Pat?

Sir:

[My advice to David J. is:] Keep your retirement! I think you should keep your retirement account and find another job. By cashing out now you only receive your contributions plus interest and not one cent of your employers contributions if your state is anything like California. You are only getting about two years of a pension that you could possibly end up collecting for 30 years or more. Not counting any cost of living increases you would receive $756,000 over a 30 year period of retirement, the $50,000 looks kind of weak.
Get a jump on things and start checking around right now for possible job opportunities . Also check out getting educated in fields you may like to work in before you do get laid off. Be sure to ask suppliers or contractors you have contact with in your job for possible employment for you. Your employer's financial condition may improve and your laid off status will get you priority when they hire again and you won't lose your seniority.
If you do get rehired in the future or work at another state or public sector job your plan will continue and your years of service won't be wasted. In my 30 years at my job I have seen many people who cashed out and were rehired or found other public pension jobs. They were very sorry they cashed out for a couple years worth of retirement money at one time. Your state pension will also have a yearly cost of living adjustments when you do retire. The nine years until you can draw a pension is a very short time.
Even if by some great stroke of bad luck you aren't rehired or get other public sector employment you will have that pension money to help you in retirement.
The only way I could see any reason to cash out is if you are very sure you could start a good business that you are confident you could have success. I know of a couple people that took chunk of early buyout money and bought a back hoe and were kept very busy.
Since you are smart enough to read SurvivalBlog I think you are way ahead of the majority and will be able to get new employment and keep your retirement backup intact. Good Luck to you! - Gil

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