Need advice on the best way to roll over money if I do a partial lump sum from TRS of Texas (A&M retirement)

On a side note my wife's financial planner told me NOT to do the lump sum and leave her 100% if i die. Is this really the best thing for me when i retire? Im 68 and she is 60

The 50,000 partial lump sum will reduce my benefit by $300 a month.

Sounds like a deal for TRS.

50K in a retirement fund at a 4% draw rate is like $166 a month

What type of advice do you need? If you need $50K for "something" just take it. Each person is different but when I retired I assessed my income and was told what my income would be should I annuitize my retirement plan. Then I calculated my RMD's should I roll said plans into an IRA and compared the two. I chose the latter for a few reasons:
1. My annuitized monthly/annual income from my retirement plan was never going up.
2. My ability to take any emergency lump sum once the plan started paying out was nil.
3. I figured I had the discipline to manage my accounts myself.

In other words committing to a long term plan with zero ability to change later was not for me. I put everything into a few self-directed IRA's and used my RMD's for extra income. It's been 6 years since I retired and my accounts have increased significantly. I guarantee that would not have happened had I told my employer to give me a monthly check.

A good example of personal finance being personal.

The 100% survivor benefit might make sense given the age gap between you and your wife but would have to pull out actuarial tables to calculate.

I don't know the ins and out of the TRS system, but the answer depends on how much you actually need the money. Ignoring the math on the survivor benefits consideration (which you shouldn't), if these are clearly excess funds in that the only people this decision will impact are heirs and you are financially literate enough to invest the funds in a well diversified portfolio, my guess is the math will slightly favors the lump sum option.

Just a choice you have to make.

I went with spouse getting 100%. It reduced my payment substantially but she's 8 years younger. And her ability to create future income is much lower than my ability to create current income.

Also, in the event that I outlive my term life, she's more likely to actually need the money when im gone.

You can also assign a grandchild as a beneficiary to maximize the terms of the benefit after your death

While true it will reduce your monthly check to almost nothing as they are calculating on paying out based on your grandchild.

My understanding is TRS doesn't adjust for inflation so that adds another wrinkle to how best to optimize it

cslifer said:

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While true it will reduce your monthly check to almost nothing as they are calculating on paying out based on your grandchild.

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They actually don't adjust based on age which is wild (option 2)

Our example - we chose to reduce monthly payout by $500/month so a beneficiary could get a 50% payment per month for life. They don't adjust the 50% based on age so you can pick someone like a grandchild or an irrevocable trust with beneficiary of a grandchild to maximize number of payments.

I had no idea, that is crazy. I am more familiar with TMRS which does adjust for age.
Have you ever done the math on what the total payout will be vs contributions (using average life expectancies for you and the grandkid)?

With you being a Texas government employee, you should have access to a 457 plan. I would put my lump sum in the 457 plan, let it grow and have access to it at any age.

TFAAGG said:

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They don't adjust the 50% based on age so you can pick someone like a grandchild or an irrevocable trust with beneficiary of a grandchild to maximize number of payments.

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I'm not sure any of this is true.

I just went on mytrs and played around with the annuity calculator and beneficiary information and when I change the beneficiary from my wife to my son option 1 (100%) goes away completely and option 2 (50%) is reduced as well as option 5 (75%) is reduced.

Option 2 (50%) drops by almost 3% and option 5 (75%) drops by almost 4.25%.

But it is an option and does potentially extend the years of the annuity, which will maximize the number of payments.